IFRS 3 vs ASC 805: what are the differences?
| Area | IFRS 3 | ASC 805 |
|---|---|---|
| Non-controlling interest | Fair value or proportionate share of net assets, deal by deal | Fair value only |
| Measurement period adjustments | Retrospective: comparatives restated as if known at acquisition | Recognised in the period determined, with catch-up effects |
| Contingent liabilities assumed | Recognised if a present obligation that can be measured reliably, even if not probable | Fair value if determinable; otherwise recognised only if probable and reasonably estimable |
| Contract assets and liabilities from customer contracts | Fair value | Measured under ASC 606, as the acquiree would have |
| Definition of a business, concentration test | Optional | Mandatory screen |
| Contingent consideration | Fair value; liabilities remeasured through profit or loss | Same |
| Goodwill after acquisition | Never amortised | Not amortised, except under the private company alternative |
| Pushdown accounting | Not addressed | Optional for the acquiree |
One acquisition under both frameworks
A company pays 650 for 80% of a business with identifiable net assets at fair value of 580. The fair value of the 20% non-controlling interest is 150.
| IFRS 3, proportionate share | IFRS 3, fair value | ASC 805 | |
|---|---|---|---|
| Non-controlling interest | 116 | 150 | 150 |
| Goodwill | 186 | 220 | 220 |
An IFRS reporter choosing the proportionate share method reports 34 less goodwill and a smaller non-controlling interest than a US reporter for the same deal. The Purchase price allocation model (Excel) runs both methods.
Why does the measurement period difference matter?
If a valuation finalised six months after the acquisition increases an intangible asset by 20, IFRS restates the acquisition date balance sheet and the comparative period, including extra amortisation since acquisition. US GAAP records the adjustment and the catch-up amortisation in the period the valuation is finalised, without restating comparatives. Reported results for the interim periods differ.
Why do contingencies differ?
A lawsuit against the acquiree with a 30% chance of loss is a present obligation measured at fair value under IFRS 3, so a liability is recognised. Under ASC 805, if fair value cannot be determined at the acquisition date, the liability is recognised only if a loss is probable, so it may not be recognised at all, with goodwill lower accordingly.
Why do the differences remain?
When the boards issued the converged standards, each kept positions its constituents supported: the IASB kept the proportionate share option because many preparers objected to measuring the non-controlling interest at fair value, and the FASB kept its existing approach to contingencies. Later changes, such as ASC 805's treatment of customer contract balances, were made by one board alone.
What should dual reporters track?
A US subsidiary of an IFRS group, or an IFRS subsidiary of a US group, should record the non-controlling interest measurement, contingent liabilities and contract balances under both frameworks at the acquisition date, and keep separate goodwill records if a private company has amortised goodwill under US GAAP.
Where to go next
See IFRS 3 explained, ASC 805 explained and full vs partial goodwill.
Need help applying the standards?
Our Chartered Accountants help finance teams and students apply IFRS and US GAAP to real transactions.
Questions people ask
What is the main difference between IFRS 3 and ASC 805?
The non-controlling interest: IFRS allows fair value or proportionate share, deal by deal, while US GAAP requires fair value, so goodwill can differ.
How are measurement period adjustments treated under IFRS and US GAAP?
Retrospectively under IFRS 3; in the period they are determined under ASC 805.
Are contingent liabilities recognised in a business combination under US GAAP?
At fair value if determinable at the acquisition date; otherwise only if a loss is probable and reasonably estimable.
Can goodwill be amortised under US GAAP?
Only by private companies that elect the accounting alternative; IFRS never allows it.
Sources
Every fee, date and rule on this page was taken from these official and primary sources.
- IFRS Foundation: IFRS 3 Business Combinations
- FASB Accounting Standards Codification: Topic 805, Business Combinations
Rules and fees change. If you are reading this long after October 4, 2026, confirm the figures with the source before you rely on them.
Related guides
More in IFRS vs US GAAP
This guide is general information. It is not tax or legal advice for your situation.