Disclosure of information about the purchase price allocation and pro forma sales and earnings

BC403 The 1999 Exposure Draft would have required tabular disclosure of the fair values allocated to each of the major classes of assets and liabilities presented in the statement of financial position and the acquiree’s related carrying amounts immediately before its acquisition. That exposure draft also proposed eliminating the pro forma sales and earnings disclosures required by APB Opinion 16.

BC404 Approximately half of the respondents who commented on the proposed requirement to disclose information about the purchase price allocation agreed that the information would be useful in assessing post‑acquisition earnings and cash flows of the acquirer. However, some respondents questioned the usefulness of the proposed disclosure of information about the acquiree’s carrying amounts of assets acquired and liabilities assumed, particularly if the financial statements of the acquiree were not audited or were prepared on a basis other than US GAAP. After considering those views, the FASB affirmed its conclusion that information about the allocation of the purchase price to major classes of assets and liabilities in the statement of financial position would be useful in assessing the amount and timing of future cash flows. However, it agreed that information about the related carrying amounts might be of limited usefulness. Thus, SFAS 141 required disclosure of information about the allocation of the purchase price to each major class of asset and liability in the acquiree’s statement of financial position but not their previous carrying amounts.