Dejected by yet another new direction in merger and acquisition accounting, the Financial Accounting Standards Board is taking a major step back in its call for fair value for contingencies.
In redeliberating planned guidance around how to account for contingencies in the context of a business combination, FASB decided to revert to language in old standards to answer the concerns about how to apply Financial Accounting Standard No. 141R: Business Combinations. The board said it will revise FAS 141R to say that assets or liabilities taken on in a business combination and arising from a contingency should be recognized at fair value if fair value can be “reasonably estimated.” That would strike the original FAS 141R requirement to recognize such items at fair value if fair value can be “determined.”
