A number of uncertainties related to income taxes may exist at the time of or arise in connection with a purchase business combination. Examples include uncertainties about the allocation of the purchase price to individual assets and liabilities for income tax purposes in a taxable business combination, uncertainties about the carryover bases of assets, liabilities, and carryforwards at the date of acquisition in a nontaxable combination, or uncertainties about tax returns of the acquired company for periods prior to the acquisition date. Statement 38 provides that the fair value of a preacquisition contingency that can be determined during the allocation period is included in the purchase price allocation. Adjustments from a preacquisition contingency that occur after the end of the allocation period are included in the determination of net income. Statement 38 did not apply to the potential tax benefits of an acquired loss carryforward. The amending language of Statement 109 indicates that Statement 38 "does not apply to potential income tax effects of (a) temporary differences and carryforwards of the acquired enterprise that exist at the acquisition date and (b) income tax uncertainties related to the acquisition (for example, an uncertainty related to the tax basis of an acquired asset Copyright © 2008, Financial Accounting Standards Boar
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