Glossary of SFAS 141 & 142 Terms

Allocation Period - The period that is required to identify and measure the fair value of the assets acquired and the liabilities assumed in a business combination. The allocation period ends when the acquiring entity is no longer waiting for information that it has arranged to obtain and that is known to be available or obtainable. Thus, the existence of a preacquisition contingency for which an asset, a liability, or an impairment of an asset cannot be estimated does not, of itself, extend the allocation period. Although the time required will vary with circumstances, the allocation period should usually not exceed one year from the consummation of a business combination (FASB Statement No. 38, Accounting for Preacquisition Contingencies of Purchased Enterprises, paragraph 4(b)).

Customer Relationship - For purposes of this Statement, a customer relationship exists between an entity and its customer if (a) the entity has information about the customer and has regular contact with the customer and (b) the customer has the ability to make direct contact with the entity. Relationships may arise from contracts (such as supplier contracts and service contracts). However, customer relationships may arise through means other than contracts, such as through regular contact by sales or service representatives. 

Fair Value - The amount at which an asset (or liability) could be bought (or incurred) or sold (or settled) in a current transaction between willing parties, that is, other than in a forced or liquidation sale.

Financial Asset - Cash, evidence of an ownership interest in an entity, or a contract that conveys to a second entity a contractual right (a) to receive cash or another financial instrument from a first entity or (b) to exchange other financial instruments on potentially favorable terms with the first entity (FASB Statement No. 107, Disclosures about Fair Value of Financial Instruments, paragraph 3(b).

Goodwill -The excess of the cost of an acquired entity over the net of the amounts assigned to assets acquired and liabilities assumed. The amount recognized as goodwill includes acquired intangible assets that do not meet the criteria in paragraph 39 for recognition as assets apart from goodwill. 

Intangible Assets - Assets (not including financial assets) that lack physical substance.

Intangible Asset Class - A group of intangible assets that are similar, either by their nature or by their use in the operations of an entity.

Mutual Enterprise - An entity other than an investor-owned entity that provides dividends, lower costs, or other economic benefits directly and proportionately to its owners, members, or participants. Mutual insurance companies, credit unions, and farm and rural electric cooperatives are examples of mutual enterprises (FASB Concepts Statement No. 4, Objectives of Financial Reporting by Nonbusiness Organizations, paragraph 7).

Not-For-Profit Organization - An entity that possesses the following characteristics that distinguish it from a business enterprise: (a) contributions of significant amounts of resources from resource providers who do not expect commensurate or proportionate pecuniary return, (b) operating purposes other than to provide goods or services at a profit, and (c) absence of ownership interests like those of business enterprises. Not-for-profit organizations have those characteristics in varying degrees (Concepts Statement 4, paragraph 6). Entities that clearly fall outside this definition include all investor-owned entities and mutual enterprises.

Pooling-of-Interests Method - A method of accounting for business combinations that was required to be used in certain circumstances by APB Opinion No. 16, Business Combinations. Under the pooling-of-interests method, the carrying amount of assets and liabilities recognized in the statements of financial position of each combining entity are carried forward to the statement of financial position of the combined entity. No other assets or liabilities are recognized as a result of the combination, and thus the excess of the purchase price over the book value of the net assets acquired (the purchase premium) is not recognized. The income statement of the combined entity for the year of the combination is presented as if the entities had been combined for the full year; all comparative financial statements are presented as if the entities had previously been combined.

Preacquisition Contingency - A contingency of an entity that is acquired in a business combination that is in existence before the consummation of the combination. A preacquisition contingency can be a contingent asset, a contingent liability, or a contingent impairment of an asset (Statement 38, paragraph 4(a)).

Public Business Enterprise - An enterprise that has issued debt or equity securities that are traded in a public market (a domestic or foreign stock exchange or an over-the-counter market, including local or regional markets), that is required to file financial statements with the Securities and Exchange Commission, or that provides financial statements for the purpose of issuing any class of securities in a public market (FASB Statement No. 131, Disclosures about Segments of an Enterprise and Related Information, paragraph 9).

Reporting Unit - The level of reporting at which goodwill is tested for impairment. A reporting unit is an operating segment or one level below an operating segment (as that term is defined in paragraph 10 of Statement 131) (FASB Statement No. 142, Goodwill and Other Intangible Assets, paragraph F1).

Residual Value - The estimated fair value of an intangible asset at the end of its useful life to the entity, less any disposal costs. 

Servicing Asset - A contract to service financial assets under which the estimated future revenues from contractually specified servicing fees, late charges, and other ancillary revenues are expected to more than adequately compensate the servicer for performing the servicing. A servicing contract is either (a) undertaken in conjunction with selling or securitizing the financial assets being serviced or (b) purchased or assumed separately (FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, paragraph 364).

Useful Life - The period over which an asset is expected to contribute directly or indirectly to future cash flows.

See Appendix F of SFAS 141 and 
Appendix F of  SFAS 142. 

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