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Who’s the accounting acquirer? Navigating new bus com guidance · PwC's accounting podcast

• 0:00
  SPEAKER_00: Thought leadership from PWC's national office.
• 0:06
  SPEAKER_01: Hello, and welcome to PWC's Accounting Podcast.
• 0:10
  SPEAKER_01: I'm Heather Horn.
• 0:12
  SPEAKER_01: Today I'm happy to announce that we're having a special episode focused on identifying the county and acquirer in an acquisition, a critical first step in accounting for business combination.
• 0:24
  SPEAKER_01: We'll also share an overview of the new FASC guidance that impacts this area.
• 0:31
  SPEAKER_01: Back as our guest host today is Diana Stoltzfit, a partner in PWC's national office.
• 0:36
  SPEAKER_01: She's joined by Matt Sabatini, a partner, and Ryan Blacker, a director, both also in our national office and who focus on business combination and consolidation issues, and who have been focused on the new standard.
• 0:49
  SPEAKER_01: With that, let's go ahead and get the episode started.
• 0:53
  SPEAKER_02: Welcome, Matt and Ryan.
• 0:54
  SPEAKER_02: Thanks for joining me today to discuss acquisition accounting, specifically determining which party is the accounting acquirer in the transaction.
• 1:02
  SPEAKER_02: We will also be discussing new guidance in this area from the FASB, which addresses a narrow but impactful area of accounting that has sparked quite a bit of stakeholder feedback in recent years.
• 1:13
  SPEAKER_03: Thanks, Diana.
• 1:13
  SPEAKER_03: It's uh great to be here.
• 1:15
  SPEAKER_03: Thanks for having us.
• 1:16
  SPEAKER_02: Okay, so let's start out by refreshing on some of the basics and level set on a few concepts.
• 1:21
  SPEAKER_02: One important step in accounting for an acquisition is determining whether it's a business combination.
• 1:27
  SPEAKER_02: Ryan, can you briefly explain what we mean when we say business combination?
• 1:31
  SPEAKER_04: Thanks, Diana.
• 1:32
  SPEAKER_04: A business combination is defined in GAAP as a transaction or other event in which an acquirer obtains control of a business.
• 1:40
  SPEAKER_04: So, you know, the next logical question is okay, well, what is a business?
• 1:43
  SPEAKER_04: Um ASC 805, which is the business combination standard, would tell us that a business is an integrated set of activities and assets, and it's capable of being managed for the purpose of providing a return.
• 1:55
  SPEAKER_04: So when we say integrated set, you know, that consists of inputs, think like PPE and a substantive process.
• 2:02
  SPEAKER_04: And, you know, often we think of that as uh a workforce, right?
• 2:05
  SPEAKER_04: And that workforce has to have the right level of expertise and experience such that when you apply that substantive process to the inputs, it has the ability to generate outputs.
• 2:15
  SPEAKER_03: Right.
• 2:15
  SPEAKER_03: We we have a whole podcast series on um business combinations, including defining what a business combination is, because there are some complexities that includes a screen test that many people are probably familiar with.
• 2:28
  SPEAKER_03: But if you want more detail, I definitely suggest going back and uh checking out that series.
• 2:32
  SPEAKER_03: Um one thing I do want to emphasize that Ryan hit on is the definition does include the notion of control, right?
• 2:39
  SPEAKER_03: So when we talk about control in the context of a business combination, we are consistent with how we define control under ASC 810, right?
• 2:46
  SPEAKER_03: So it's a controlling financial interest.
• 2:48
  SPEAKER_02: Okay, got it.
• 2:50
  SPEAKER_02: So it's important to determine when the acquire obtains control of the business.
• 2:54
  SPEAKER_02: But to do that, we need to determine who the acquirer is.
• 2:57
  SPEAKER_02: So, Ryan, maybe you can explain more on why identifying the accounting acquirer is such a critical step in a business combination.
• 3:04
  SPEAKER_04: Right.
• 3:05
  SPEAKER_04: Well, in any business combination, you know, the starting point is identifying the accounting acquirer.
• 3:09
  SPEAKER_04: It's really the accounting acquirer's perspective that drives the application of the acquisition method under ASC 805.
• 3:17
  SPEAKER_04: And so for each business combination, one of the combining entities is identified as the acquirer for accounting purposes.
• 3:24
  SPEAKER_04: So if we look at you know the consolidated post-combination financial statements, right?
• 3:30
  SPEAKER_04: Um, you know, for for the acquiree, their basis is going to get stepped up.
• 3:34
  SPEAKER_04: And generally, you know, we'd remeasure the assets and liabilities at fair value.
• 3:38
  SPEAKER_04: I think if we look at the acquirer's historical results, um, which form the basis of those post-combination financial statements, those existing assets and liabilities of the accounting acquirer would not would not be adjusted.
• 3:50
  SPEAKER_02: Okay.
• 3:51
  SPEAKER_02: So getting the acquirer right is important to determine which entity's basis gets stepped up.
• 3:56
  SPEAKER_02: It sounds like it's possible that the nature of the transactions could be different based on this result.
• 4:02
  SPEAKER_04: Right.
• 4:02
  SPEAKER_04: Yeah, that that's a great point.
• 4:03
  SPEAKER_04: So it is possible that, you know, once you identify the accounting acquirer, you might actually not have a business combination at all.
• 4:10
  SPEAKER_04: So, say, for example, you know, the acquiry for accounting purposes, it doesn't meet the definition of a business.
• 4:16
  SPEAKER_04: In in that case, the acquirer would then apply other gaps.
• 4:20
  SPEAKER_04: So, you know, think like the guidance for asset acquisitions.
• 4:23
  SPEAKER_04: So that's why it's important to get the accounting acquirer right because ultimately it's driving the accounting and and can also dictate the nature of the transaction.
• 4:31
  SPEAKER_02: Okay.
• 4:32
  SPEAKER_02: So, Matt, I think there's maybe one more concept that we can clarify before we dive into the determination of the accounting acquirer.
• 4:39
  SPEAKER_02: The historical accounting guidance differs depending on whether the acquirer is a voting interest entity or a variable interest entity.
• 4:48
  SPEAKER_02: So can you quickly refresh on those key terms and explain what we mean?
• 4:52
  SPEAKER_03: Yeah, I'm happy to.
• 4:53
  SPEAKER_03: And you know it wouldn't be a podcast with me uh on it if I didn't talk about VIEs, right?
• 4:58
  SPEAKER_03: So um and I I know I always plug our previous podcast series, but we do have one, right, on VIEs and VOEs that goes into great detail on how to distinguish between the two.
• 5:08
  SPEAKER_03: But at a high level, and for purposes of today's discussion, I think it's enough to say um for voting interest entities, that's where a controlling financial interest is generally identified through voting rights that are embedded within usually common shares, but any kind of voting shares.
• 5:23
  SPEAKER_03: Um that makes sense.
• 5:24
  SPEAKER_03: That's why we call it the voting uh interest model.
• 5:27
  SPEAKER_03: For the variable interest model, um, we're looking for a controlling financial interest that can manifest itself through power in other contractual relationships or through other means.
• 5:38
  SPEAKER_03: Um, so that's generally the difference.
• 5:40
  SPEAKER_03: What I'd say is the starting point for determining control and a controlling financial interest is trying to figure out if the entity you're looking at is a variable interest entity.
• 5:48
  SPEAKER_03: And that's kind of what kicks you off.
• 5:50
  SPEAKER_03: So I I know that sounds pretty easy in terms of trying to figure out which entity acquired control of which, right?
• 5:56
  SPEAKER_03: The controlling financial interest.
• 5:58
  SPEAKER_03: Um, and then sometimes it is, right?
• 5:59
  SPEAKER_03: Um, but oftentimes where you see a business accommodation, it's um transacted through a share exchange or an equity exchange, and it became a little bit more complicated in those situations, which we're definitely going to hit on later.
• 6:10
  SPEAKER_02: Okay, got it.
• 6:12
  SPEAKER_02: Well, let's start by then talking about the guidance applicable when the acquiry is a VIE.
• 6:17
  SPEAKER_02: So this guidance is being impacted by the new ASU.
• 6:21
  SPEAKER_02: So before getting into the new guidance, maybe first what we can talk about is uh how you would apply the current guidance when a company acquires a VIE.
• 6:30
  SPEAKER_02: Sure.
• 6:31
  SPEAKER_03: So prior to ASU 202503, that's the new guidance that you referred to.
• 6:36
  SPEAKER_03: The rule was actually pretty straightforward.
• 6:39
  SPEAKER_03: If the legal acquiry was a VIE, then the primary beneficiary, so the party who consolidates or acquired control, is always treated as the accounting acquirer.
• 6:48
  SPEAKER_03: So it was just kind of a hard and fast rule.
• 6:50
  SPEAKER_03: If the legal target is a VIE, primary beneficiary is the accounting acquirer.
• 6:55
  SPEAKER_03: Um, that was true regardless of whether the transaction was structured, structured as a cash deal, an equity exchange, or by some other means of somebody acquiring control.
• 7:05
  SPEAKER_03: Um, even in instances where maybe logically or economically, you didn't feel like that was the right answer.
• 7:11
  SPEAKER_03: You didn't really feel like the PB was the one acquiring control.
• 7:15
  SPEAKER_03: And that's where there can be a disconnect between the accounting rules and the economics of a transaction, right?
• 7:21
  SPEAKER_03: So if you had the same kind of structural transaction, you could end up with two totally different answers depending on whether the target was a VIE or a voting interest entity.
• 7:30
  SPEAKER_02: Okay.
• 7:31
  SPEAKER_02: So for an example, you could think maybe about a reverse acquisition where the legal target is determined to be the accounting acquired.
• 7:38
  SPEAKER_03: Yeah, exactly.
• 7:38
  SPEAKER_03: So a reverse acquisition is exactly how you define it, right?
• 7:41
  SPEAKER_03: It's kind of like the flip of what happens legally is how you're going to account for uh for accounting purposes.
• 7:47
  SPEAKER_03: That um reverse acquisition result wasn't really possible when the legal target was a VIE under the under the current rules or under the current guidance.
• 7:54
  SPEAKER_02: Okay, so maybe now you can explain what's changed with the new guidance.
• 7:58
  SPEAKER_03: Sure.
• 7:58
  SPEAKER_03: Yeah.
• 7:58
  SPEAKER_03: So the the new ASU essentially eliminates the requirement that the primary beneficiary is always going to be the accounting acquirer.
• 8:06
  SPEAKER_03: So it it introduces a concept that when the legal target is a VIE and it meets the definition of a business and the deal is mostly a share exchange, um, then you don't default anymore to the primary beneficiary.
• 8:19
  SPEAKER_03: You rather use the criteria that previously existed in 805 that still exists to come up with a more qualitative and kind of economically substantive analysis to determine who the accounting acquirer is.
• 8:30
  SPEAKER_04: Yeah, and I think, you know, Matt, maybe that's a good point, right?
• 8:33
  SPEAKER_04: It it is a big shift.
• 8:34
  SPEAKER_04: So, you know, if equity is, you know, the main form of consideration, you go through, evaluate those indicators to figure out who the accounting acquirer is.
• 8:42
  SPEAKER_04: And you know, it doesn't matter anymore if the legal acquiry is a VIE.
• 8:46
  SPEAKER_02: So in effect, the VIE under these conditions are no longer treated differently from voting interest entities when it comes to determining the accounting acquiring.
• 8:54
  SPEAKER_03: Exactly, right.
• 8:55
  SPEAKER_03: And the the goal of the FASB in pursuing this ASU is to achieve greater consistency and comparability across deals, right?
• 9:04
  SPEAKER_03: So if two entities, two companies engage in economically similar transactions, you're going to get the same accounting results for each.
• 9:10
  SPEAKER_03: And again, just to re-emphasize, the the guidance that was changed in the ASU only applies in situations where the the VIE, the legal target, is a business and the exchanges or the transaction is primarily effective through an exchange of equity interests.
• 9:25
  SPEAKER_02: Okay.
• 9:25
  SPEAKER_02: So it seems, Matt, that you're making uh uh important point that this approach only applies when the deal is related to an equity exchange.
• 9:34
  SPEAKER_02: Maybe you can explain why the guidance isn't changing for cash deals.
• 9:38
  SPEAKER_03: Yeah, it's a good question.
• 9:39
  SPEAKER_03: And and it refers back to the point I made earlier where sometimes it's obvious um who the accounting acquirer is.
• 9:44
  SPEAKER_03: In those situations, for example, a cash deal, when you see company A acquire company B with cash, the shareholders of company B are no longer around.
• 9:53
  SPEAKER_03: They're taken out, right?
• 9:54
  SPEAKER_03: So it's obvious in that situation that company A acquired control of company B and you know who the accounting acquirer is.
• 10:00
  SPEAKER_03: However, if you take that same transaction, you flip it into an equity exchange, uh, the the equity owners of both company A and company B are still there at the end of the transaction.
• 10:08
  SPEAKER_03: So now you have a combined company A and company B and a combined set of equity owners.
• 10:13
  SPEAKER_03: Really, either entity could have issued the equity, like could have been the legal issuer.
• 10:18
  SPEAKER_03: Um kind of irrelevant to the economics of the transaction.
• 10:21
  SPEAKER_03: So now you need to figure out well, who really acquired control?
• 10:25
  SPEAKER_03: And that's where the definition of a controlling financial interest is less helpful.
• 10:28
  SPEAKER_03: Uh, and we'll get into some of those factors that you would you would consider in a minute.
• 10:32
  SPEAKER_02: Great.
• 10:32
  SPEAKER_02: That's really helpful.
• 10:33
  SPEAKER_02: Now, Ryan, let's move into the actual factors in ASC 805 that are used to determine who is the accounting acquirer in a share-based business combination.
• 10:43
  SPEAKER_02: Can we walk through those?
• 10:45
  SPEAKER_04: Yeah, absolutely.
• 10:46
  SPEAKER_04: So again, these factors apply when a business combination is affected primarily through the exchange of equity interests.
• 10:52
  SPEAKER_04: They're the same factors that exist in GAAP today when the acquiry is a voting interest entity, but now they'll also apply when the legal target is a VIE that meets the definition of a business.
• 11:02
  SPEAKER_04: So let's take them one by one.
• 11:04
  SPEAKER_04: So just the the first one, and it's probably I I think the most intuitive is relative voting rights in the combined entity.
• 11:10
  SPEAKER_04: So, you know, generally the acquire is the entity whose owners retain or receive the largest portion of the voting rights post-combination.
• 11:19
  SPEAKER_04: So often, you know, that that's straightforward if you just think about common equity.
• 11:24
  SPEAKER_04: Sometimes you might have things like options or warrants that that may impact this factor, though.
• 11:29
  SPEAKER_02: Okay.
• 11:29
  SPEAKER_02: So if we take a straightforward example, maybe and say that you know a company's share holds 80% of the voting shares of the combined entity and the other has 20%, that would usually be a strong indicator of which entity is the acquirer.
• 11:45
  SPEAKER_02: Is that right?
• 11:45
  SPEAKER_04: Yeah, I think that I think that's a really good example.
• 11:48
  SPEAKER_04: You know, when when the split's significant, 80 20, 90 10, um, I think that's you know pretty determinative.
• 11:54
  SPEAKER_04: Obviously, you got to go through all the factors, but it would be pretty hard to overcome from the other ones.
• 11:59
  SPEAKER_04: But I think, you know, if the ownership split is particularly close, if you're, you know, say 5149, then you need to evaluate the other factors to get a full picture because in that case, then the this factor isn't particularly determinative.
• 12:12
  SPEAKER_02: Okay, that makes sense.
• 12:14
  SPEAKER_02: So what's the next factor?
• 12:16
  unknown: Yeah.
• 12:16
  SPEAKER_04: So the the next one that we look at um is whether there's a single large minority voting interest.
• 12:22
  SPEAKER_04: And and that's especially true if no one else is um a significant shareholder.
• 12:28
  SPEAKER_04: So let's say there's a wide dispersion of the shareholder base, and um maybe there's one particular investor that holds a significant minority stake.
• 12:38
  SPEAKER_04: Let's just say it's you know 40%.
• 12:40
  SPEAKER_04: Um, in that case, you know, the pre-combination entity in which that investor had an ownership interest, you know, that that might be considered the acquirer for accounting purposes.
• 12:50
  SPEAKER_02: So it's about whether there's a single shareholder that has an outsized influence.
• 12:55
  SPEAKER_04: Yeah, exactly exactly, right?
• 12:56
  SPEAKER_04: So can somebody tip the scales?
• 12:58
  SPEAKER_04: Can somebody dominate the decision making?
• 13:00
  SPEAKER_04: I guess the idea here is, you know, it would be pretty hard for a group of you know 1% or 2% shareholders to all vote in concert and override that large minority interest holder.
• 13:11
  SPEAKER_02: Got it.
• 13:12
  SPEAKER_02: So governance is also an important point to consider when you're thinking about the combined entity.
• 13:16
  SPEAKER_02: What do we look for here?
• 13:18
  SPEAKER_04: Right.
• 13:18
  SPEAKER_04: Yeah, governance, um, maybe two different elements to governance.
• 13:22
  SPEAKER_04: I'll take the the first one, right?
• 13:24
  SPEAKER_04: Um, and that's the the composition of the board or the the governing body of the combined entity.
• 13:30
  SPEAKER_04: So we're looking at whether the owners of one company have the ability to appoint or remove and replace a majority of the board members.
• 13:38
  SPEAKER_04: That's a that's a strong indication that their company is the accounting acquirer.
• 13:43
  SPEAKER_04: Um, you know, one thing I guess I would point out here is you you do want to assess whether this control lasts beyond the close of the deal or if it's just you know something that's temporary.
• 13:52
  SPEAKER_04: So who's controlling the board decisions post-combination?
• 13:56
  SPEAKER_04: Um, maybe you know the combined company plans to rebalance the board shortly after the deal.
• 14:00
  SPEAKER_04: So that that should also be factored into the analysis.
• 14:03
  SPEAKER_02: I guess another element that relates to governance would be the senior management of the combined entity.
• 14:09
  SPEAKER_04: Right.
• 14:09
  SPEAKER_04: Yep.
• 14:10
  SPEAKER_04: And this one's also um can be you know a strong indicator as well, right?
• 14:15
  SPEAKER_04: So if you've got the management team of one of the pre-combination entities that dominates the leadership roles and the combined entity, you know, and I'm thinking about C-suite, CEO, COO, that's that's uh a strong sign that they would be the accounting acquirer.
• 14:31
  SPEAKER_03: Right.
• 14:31
  SPEAKER_03: Sometimes I think in in deals, uh mergers that we've seen in practice, there's a mixed uh team at the combined entity.
• 14:38
  SPEAKER_03: So it's important to look at levels of seniority, um, any employment agreement agreements and and really who's driving the the um management of the company and also whether or not there's one CEO who gets to select their own management team.
• 14:52
  SPEAKER_03: That all kind of weighs in when you're trying to figure out qualitatively which way this factor goes.
• 14:57
  SPEAKER_02: That's a great point.
• 14:58
  SPEAKER_02: Are there any other factors that need to be considered, Ryan?
• 15:02
  SPEAKER_04: Yeah, so uh another factor relates to the terms of the exchange of equity interest.
• 15:07
  SPEAKER_04: If you know, if one party pays a premium, that usually suggests it's the accounting acquirer.
• 15:12
  SPEAKER_04: And sometimes you can tell um, you know, if if you have say two public companies, but you know, I would say, you know, we do also often see that it gets a lot harder when you've got a public company acquiring a private company.
• 15:25
  SPEAKER_04: So um, you know, if the valuation is close or the exchange is even, this factor might be neutral or as we've been saying, sort of not particularly determinative.
• 15:34
  SPEAKER_02: The relative size of each of the companies can also be a factor as well, right?
• 15:38
  SPEAKER_04: Yeah, that's right.
• 15:39
  SPEAKER_04: So, you know, as you would expect, I think we would often say, you know, the bigger company could be the acquirer, um, and you'd look at metrics like total assets, um, revenue, earnings, um, market cap, but but just like the other factors, right?
• 15:55
  SPEAKER_04: This isn't uh determinative.
• 15:56
  SPEAKER_04: So it's just one piece of the puzzle.
• 15:58
  SPEAKER_02: Yeah, but from this discussion, it seems like it's important for companies to take a holistic view and think about the specific facts and circumstances of this transaction in order to make this judgment.
• 16:08
  SPEAKER_03: Right.
• 16:09
  SPEAKER_03: So a few key points there.
• 16:11
  SPEAKER_03: Um sometimes it's particularly close, even when you work through all of the factors that Ryan just went through, right?
• 16:17
  SPEAKER_03: So we might even consider some other qualitative factors around the edges, like the combined entity's name, it's where it's choosing to locate its headquarters building, um, the ticker symbol.
• 16:28
  SPEAKER_03: So, you know, maybe who initiated the transaction.
• 16:31
  SPEAKER_03: Sometimes it becomes clear that one of the combining entity strategies is what's gonna drive the combined strategy going forward.
• 16:38
  SPEAKER_03: So those are all things you would take into account from a qualitative perspective, particularly in in close call situations.
• 16:44
  SPEAKER_03: Ultimately, though, I like the term holistic, right?
• 16:47
  SPEAKER_03: Because you are looking at the factors in totality.
• 16:50
  SPEAKER_03: You're not treating this, um, you're not gonna take everything Ryan just said and put it down on a piece of paper as a checklist, right?
• 16:55
  SPEAKER_03: And you're not gonna say, oh, you know, it was four to three, so company A wins, right?
• 16:59
  SPEAKER_03: You have to think about the specific facts and circumstances surrounding your transaction.
• 17:02
  SPEAKER_03: I know we say that a lot, uh, but in this case, it's super relevant to figuring out how much you're gonna weigh each one.
• 17:07
  SPEAKER_03: Um, so there may be um a dominant board of directors and management team that points to one party in those situations, if it's so dominant that you may put more weight on that.
• 17:17
  SPEAKER_03: Um, and Ryan already mentioned this, but the closer it is on relative voting rights, the more weight you're gonna put on some of the other factors.
• 17:23
  SPEAKER_03: Um but at the end of it all, you have to have a coherent story.
• 17:26
  SPEAKER_03: Um, and it's gonna be one, hopefully, that you can support and that isn't easily structured to achieve a specific outcome, right?
• 17:33
  SPEAKER_02: Right, right.
• 17:35
  SPEAKER_02: Well, Ryan, maybe before we wrap up, let's make sure our listeners know when the new guidance takes effect and what the transition provisions look like.
• 17:43
  SPEAKER_02: So can you walk us through that?
• 17:44
  SPEAKER_04: Yeah, of course.
• 17:45
  SPEAKER_04: So ASU 202503 is effective for all entities.
• 17:49
  SPEAKER_04: So there's no distinction between public and private, right?
• 17:52
  SPEAKER_04: This applies to all entities for fiscal years beginning after December 15th, 2026.
• 17:59
  SPEAKER_04: That includes interim periods.
• 18:01
  SPEAKER_04: And so, you know, I guess plainly for calendar year end companies, that means 2027.
• 18:05
  SPEAKER_04: But, you know, I know we that sounds a little bit far into the future, but you know, good news the standard is early adoptable, right?
• 18:12
  SPEAKER_04: So that's permitted.
• 18:13
  SPEAKER_04: Um, if you're going to adopt on an interim basis, there's sort of a a choice, right?
• 18:18
  SPEAKER_04: It can be adopted either for all transactions occurring from the beginning of the annual period or just to those occurring from the beginning of the interim period in which the company adopts.
• 18:29
  SPEAKER_02: Got it.
• 18:30
  SPEAKER_02: So if a company chooses to early adopt in Q3 2025, they could apply the new guidance to deals that happened as early as January 1, 2025?
• 18:40
  SPEAKER_04: Yeah, they they could.
• 18:41
  SPEAKER_04: You know, one thing to remember is that the transitions prospective to all business combinations that have an acquisition date on or after the initial application of the guidance.
• 18:50
  SPEAKER_04: So if they chose to apply the guidance to all transactions from the beginning of the annual period, that would be transactions from January 1st forward.
• 18:58
  SPEAKER_04: They could have also chosen, you know, in Q3 2025, it would have been, you know, as of July 1st of 2025.
• 19:04
  SPEAKER_04: So I think just generally speaking, I think we sort of think it's unlikely you'd have more than one of these transactions in a year, but but it is worth noting on the transition.
• 19:13
  SPEAKER_02: Okay, great.
• 19:14
  SPEAKER_02: Before we close, any final thoughts to our listeners as they prepare for this standard?
• 19:19
  SPEAKER_02: Maybe Matt, I'll start with you.
• 19:20
  SPEAKER_03: Yeah, sure.
• 19:21
  SPEAKER_03: So I guess the first point is that the new ASU is a targeted change, right?
• 19:26
  SPEAKER_03: Um, but it you know, it can have a real impact, and it really depends on the type of transaction you're talking about.
• 19:31
  SPEAKER_03: So we talked about reverse acquisitions, it definitely changes the way you're going to think about reverse acquisitions, particularly when the target may or may not be a VIE.
• 19:39
  SPEAKER_03: Um you know, could impact deals involving SPACs too, which we've seen less of recently, but uh you never know.
• 19:45
  SPEAKER_03: I guess the second point I would remind folks is that, you know, I know we talked about this a lot, but it's it's important to think kind of critically and holistically about the factors for counting acquirer that we talked about that exist in 805.
• 19:58
  SPEAKER_03: Um nothing's changed relating to this guidance on those factors.
• 20:01
  SPEAKER_03: Um, but it's always a good reminder for folks to know that, again, it's not a checklist.
• 20:06
  SPEAKER_03: We weigh them all um depending on the facts and circumstances and um kind of knowing ahead of time, right, is allows you to plan uh effectively because I know this was like the very beginning of our podcast, but it does matter, right, who the accounting acquirer is because it really dictates where your valuation work is going to be focused.
• 20:22
  SPEAKER_03: Um it it'll focus your diligence efforts a little bit more clearly.
• 20:25
  SPEAKER_03: So it is important to kind of get on top of this early.
• 20:28
  SPEAKER_02: Right.
• 20:28
  SPEAKER_04: Yeah, and maybe I'd I I'd just offer that, you know, early planning is key, right?
• 20:33
  SPEAKER_04: So if you're if you're contemplating a deal, if if the target um is a VIE, you might want to consider early adoption if you know the accounting under this new standard leads to a more representative outcome of the economics.
• 20:46
  SPEAKER_02: That makes sense.
• 20:47
  SPEAKER_02: Well, lastly, where can our listeners go to find more guidance on this topic?
• 20:51
  SPEAKER_04: Well, fortunately, we have um already updated our business combinations guide.
• 20:55
  SPEAKER_04: So um listeners can take a look at section 2.3 for further information on the new ASU.
• 21:01
  SPEAKER_02: Well, great.
• 21:02
  SPEAKER_02: Well, thank you, Ryan and Matt, for joining me today.
• 21:04
  SPEAKER_02: This has been a really great discussion.
• 21:06
  SPEAKER_02: Thank you.
• 21:06
  SPEAKER_04: Yeah, appreciate it.
• 21:08
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  SPEAKER_01: From Thought Leadership at PwC, I'm Heather Horn.
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