Business Combinations: Accounting and Tax Reporting Responsibilities, ASC 805 and ASC 740 Guidelines

Business combinations create complex tax and accounting reporting issues. Updated in 2021, ASC 805, Business Combinations, provides guidelines for recording these transactions. A combination could be taxable or nontaxable. Asset acquisitions, for example, can generate taxable income and goodwill. Even though a stock acquisition may be nontaxable, the acquirer must record the assets received at their fair value. The tax basis of these assets, however, is carried over, creating discrepancies between GAAP and tax values. 

Perhaps the most formidable aspect of these combinations is the determination of deferred taxes and relative valuation allowances under ASC 740. Most notably, differences in book/tax values create recognition timing differences for book/tax purposes. Acquired carryforwards and uncertain tax positions further complicate these calculations. Tax professionals working with companies considering mergers or acquisitions must understand the intricacies of the tax reporting responsibilities associated with these transactions. 

Listen as our panel of corporate tax professionals points out the key financial and tax reporting issues encountered by businesses and their accountants when companies combine.

I. Business combinations: introduction

II. ASC 805, Business Combinations

III. Taxable vs. nontaxable business combinations

IV. Goodwill

V. ASC 740, Income Taxes

VI. Deferred taxes

VII. Valuation allowances

VIII. Best practices

The panel will cover these and other critical issues:

• Distinguishing between taxable (asset) and nontaxable (stock) acquisitions
• Measuring deferred tax assets and liabilities under ASC 805 and ASC 740
• Calculating deferred tax assets when tax-deductible goodwill exceeds book goodwill
• Determining and reporting valuation allowances

Learning Objectives

After completing this course, you will be able to:

• Identify goodwill created by business combinations
• Determine deferred tax assets and liabilities under ASC 805 and ASC 740
• Decide how M&A impacts tax attributes
• Ascertain key differences in taxable and nontaxable business combinations

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite:

  Three years+ business or public firm experience preparing complex tax forms and schedules, supervising other preparers or accountants. Specific knowledge and understanding of corporate taxation, including taxation of businesses, accounting methods, net operating losses and loss limitations; familiarity with net operating loss carry-backs and carry-forwards.

  
  

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IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).