Energy Companies Can Early Adopt New ASU to Simplify Business Combination Accounting

By Amy Stutzman, Opportune, Tulsa

Accounting Standards Update 2015-16 (“ASU 2015-16”),  Simplifying the Accounting for Measurement-Period Adjustments, eliminates the requirement that an acquirer in a business combination restate prior period financial statements for measurement period adjustments.

Due to the complexity of business combinations in the energy industry, acquirers often report preliminary estimates regarding the fair values of assets required and liabilities assumed.  These preliminary estimates are subsequently adjusted in the financial statements as new information is obtained during the “measurement period” up to one year after the acquisition closing date.  Under ASC 805, an acquirer in a business combination is currently required to restate the comparative prior period information presented in its financial statements to reflect any changes to previously reported estimates.

The new guidance allows the acquirer to recognize the cumulative impact of a measurement period adjustment (including the impact on prior periods) during the period in which the amount of the adjustment is determined within the financial statement line item affected.  The acquirer must disclose, by financial statement line item affected: 1) the amounts and reasons for adjustments; and 2) the amount of the adjustments reflected in the current period income statement related to prior periods. 

ASU 2015-16 will reduce complexity and cost by eliminating the requirement for retrospective restatement of financial information of prior periods for the effects of changes to preliminary estimates determined during the measurement period.  Companies with open measurement periods should consider early adoption of ASU 2015-16; however, management should keep in mind that recognizing the entire impact of material adjustments in one reporting period could increase volatility in earnings and reduce comparability.

ASU 2015-16 is effective for public business entities for interim and annual periods beginning after December 15, 2015.  For all other entities, it is effective for annual periods beginning after December 15, 2016, and interim periods beginning after December 15, 2017.  Early adoption is permitted.

If you have questions regarding business combination accounting, please contact Amy Stutzman at or Josh Sherman at

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