How Customer Acquisitions shall drive Revenue Contracts?

How Customer Acquisitions shall drive Revenue Contracts?

FASB Standards for Continuity in Recognition and Measurement

FASB has proposed a new standard to increase accounting consistency for revenue con­tracts, where a customer has been acquired in a business combination. It requires an acquiring entity to recognize and measure contract assets and liabilities from a customer in accordance with FASB ASC Topic 606, Revenue from Contracts with Customers & FASB ASC Topic 805, Business Combi­nations.

Going by this accounting standard, an acquirer would need to recognize and measure the acquired contract assets and liabilities post acquisition & compare the same with the acquired entity’s pre-acquisition financial statements.

FASB’s website invites comments on its proposal by March 15. However, at the same time FASB clarifies that the proposal will not be impacting the accounting for customer-related intangible assets, contract-based intangible assets, or any other such assets or liabilities which may arise from revenue contracts from customers in a business combination.

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