What must a business combinations footnote disclose?

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AcadiFi · Accepted Answer

ASC 805 / IFRS 3 require extensive disclosures for business combinations in the period of acquisition and through measurement-period adjustments. Key items: (1) name and description of acquiree; (2) acquisition date and percentage acquired; (3) primary reasons for the acquisition and goodwill rationale; (4) fair value of total consideration, broken into cash, equity issued, contingent consideration, and pre-existing relationships settled; (5) recognized amounts by major class of assets and liabilities acquired; (6) goodwill expected to be deductible for tax; (7) supplemental pro forma revenue and earnings as if acquired at start of year; (8) acquiree's revenue and earnings included in post-acquisition period; (9) measurement-period adjustments in subsequent periods. Example: Orion Networks' 10-K discloses its $1.8B acquisition of PacketForge: $1.2B cash + $400M stock + $200M contingent earnout (fair value). Identifiable net assets $900M, goodwill $900M, of which $150M tax-deductible. Pro forma FY revenue $6.2B (as-if) vs $5.4B actual. These disclosures let analysts separate organic growth from M&A and assess whether goodwill was justified.

What must a business combinations footnote disclose?

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