Presentation of acquired cash in a business combination

ARTICLE | December 15, 2023

Authored by RSM US LLP

Upon executing a business combination, consideration is generally transferred to the sellers from the buyer. The nature of the consideration transferred by the buyer in a business combination typically results in one or more of the following:

  • Transferring cash or other assets on a contingent or noncontingent basis
  • Incurring liabilities payable to former owners of the target
  • Issuing equity interests

When preparing financial statement disclosures, the buyer is required to provide information about the consideration transferred, including the fair value of each major class of consideration transferred and the aggregate amount of consideration transferred. When determining the amount to disclose as cash consideration transferred, we believe the full amount of cash transferred in the business combination should be included. In other words, any acquired cash from the seller should be treated the same as all other assets acquired and not netted against cash consideration transferred. For example, if an entity acquires 100% of Target for $15 million in cash and the total identifiable net assets acquired measured in accordance with the Financial Accounting Standards Board’s Accounting Standards Codification Topic 805, Business Combinations, is $12.5 million (which includes acquired cash of $1.2 million), the acquirer should disclose consideration transferred of $15 million and acquired cash of $1.2 million (rather than net consideration transferred of $13.8 million).

For additional guidance on this topic and other issues that arise when accounting for a business combination, refer to our publication,A guide to accounting for business combinations.

Let's Talk!

Call us at (800) 627-0636 or fill out the form below and we'll contact you to discuss your specific situation.

  • Topic Name:
  • Should be Empty:

This article was written by RSM US LLP and originally appeared on 2023-12-15.
2022 RSM US LLP. All rights reserved.

RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each is separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit us for more information regarding RSM US LLP and RSM International. The RSM logo is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.

Lewis, Hooper & Dick, LLC is a proud member of the RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.

Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise and technical resources.

For more information on how Lewis, Hooper & Dick, LLC can assist you, please call 1-800-627-0636.