The acquisition date is the date on which the acquirer obtains control of the acquiree in a business combination (FASB Statement No. 141(R), paragraph 3(c)). It is a control question rather than a paperwork question, so it is not automatically the day the agreement was signed, not automatically the day the money moved, and not something the parties can set for convenience. The assets acquired, the liabilities assumed and any noncontrolling interest are all measured as of that one day, so moving the date moves the whole entry.
Control Usually Passes at Closing, and Sometimes Does Not
The standard states the general rule and then immediately qualifies it. The date on which the acquirer obtains control of the acquiree generally is the date on which the acquirer legally transfers the consideration, acquires the assets, and assumes the liabilities of the acquiree, which is the closing date (FASB Statement No. 141(R), paragraph 11).
However, the acquirer might obtain control on a date that is either earlier or later than the closing date, and the standard gives the earlier case as its own example: the acquisition date precedes the closing date if a written agreement provides that the acquirer obtains control of the acquiree on a date before the closing date (FASB Statement No. 141(R), paragraph 11).
There is no shortcut past that judgment. An acquirer shall consider all pertinent facts and circumstances in identifying the acquisition date (FASB Statement No. 141(R), paragraph 11). On a real deal that means reading the agreement for when control actually transfers, not reading the wire confirmation.
What the Date Fixes
Two separate things hang on it, and they are easy to run together.
The first is measurement. The acquirer shall measure the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at their acquisition-date fair values (FASB Statement No. 141(R), paragraph 20). Move the date and every one of those fair values is a different number. What that does to the residual is worked through in goodwill, and the equity side is in non-controlling interest.
The second is classification. At the acquisition date, the acquirer shall classify or designate the identifiable assets acquired and liabilities assumed as necessary to subsequently apply other GAAP, and shall make those classifications or designations on the basis of the contractual terms, economic conditions, its operating or accounting policies, and other pertinent conditions as they exist at the acquisition date (FASB Statement No. 141(R), paragraph 17). Whether a security is trading, available for sale or held to maturity is settled by the conditions on that day, not by how the acquiree had it labelled the week before (FASB Statement No. 141(R), paragraph 18).
The Measurement Period Runs From It, and Does Not Move It
Getting the date right does not mean getting every number right on day one. The measurement period is the period after the acquisition date during which the acquirer may adjust the provisional amounts recognized for a business combination, and it gives the acquirer a reasonable time to obtain the information necessary to identify and measure the assets acquired, the liabilities assumed, any noncontrolling interest, and the consideration transferred, as of the acquisition date (FASB Statement No. 141(R), paragraph 52).
It does not run indefinitely. The measurement period ends as soon as the acquirer receives the information it was seeking about facts and circumstances that existed as of the acquisition date or learns that more information is not obtainable, and however that goes, the measurement period shall not exceed one year from the acquisition date (FASB Statement No. 141(R), paragraph 51).
Note what the period does and does not let you change. During the measurement period, the acquirer shall recognize adjustments to the provisional amounts as if the accounting for the business combination had been completed at the acquisition date (FASB Statement No. 141(R), paragraph 55). The window is for better information about that date. It is not a chance to pick a different one.
What It Gets Confused With
The closing date is the usual confusion, and the two coincide often enough that people stop checking. They are still different questions, and the standard treats them as different.
The agreement or signing date is the second. A signed agreement can fix when control will pass, which is what makes it evidence, but the date the parties signed is not itself the acquisition date.
The third confusion is a different subject wearing the same words. Date acquired on a US tax return is a column about one taxpayer’s own asset, not about control of a business, and one example of how that column behaves when the usual answer does not apply is in step up basis.
Common Questions
No. Closing is the general case, and the standard says control may pass on a date that is either earlier or later than the closing date, with a written agreement transferring control early as its own example (FASB Statement No. 141(R), paragraph 11).
Until the acquirer has the information it was seeking, and in no case more than one year from the acquisition date (FASB Statement No. 141(R), paragraph 51). Adjustments inside that window are recognized as if the accounting had been completed at the acquisition date, so they revise that date’s numbers rather than moving to a new one (FASB Statement No. 141(R), paragraph 55).
If your firm is carrying acquisition accounting workpapers it would rather hand off, you can put a real block of that work through a trial task before any client file depends on it.
