Acquisition Date
The acquisition date is the specific date on which the acquiring company obtains control over the acquiree (the target company) in a business combination or acquisition. On this date, the acquiring company becomes legally responsible for the acquired business and is entitled to its assets, liabilities, and future earnings. The acquisition date is crucial in accounting as it serves as the starting point for the application of the acquisition method, which involves the recognition and measurement of assets, liabilities, and non-controlling interests of the acquiree.
In most cases, the acquisition date is the date when the transaction is officially completed, and the control is transferred. This could be the date when a majority stake in the target company is purchased, or when the legal agreement is signed and the necessary regulatory approvals are obtained. The acquisition date may not necessarily coincide with the announcement date or the payment date.
Example of an Acquisition Date
Let’s consider a hypothetical example of an acquisition:
Company A, a tech giant, is interested in acquiring Company B, a promising startup specializing in artificial intelligence. After a series of negotiations, both parties agree on the terms of the acquisition. They sign a legal agreement on June 1, 2023, and obtain all necessary regulatory approvals by June 15, 2023.
In this case, the acquisition date would be June 15, 2023, since that is when Company A gains control over Company B, having signed the agreement and received all regulatory approvals. From this date onward, Company A will include the assets, liabilities, and earnings of Company B in its consolidated financial statements, and it will apply the acquisition method for accounting purposes.
