What is the Acquisition Date?

The acquisition date is the date on which an acquirer takes control of a target company from its former shareholders. The acquisition date is stated in the underlying acquisition agreement. This is the day on which the assets of the acquiree are valued for accounting and tax purposes. This is also the date from which the acquired entity’s financial results are consolidated with those of its acquirer for financial reporting purposes.

Characteristics of the Acquisition Date

The key characteristics of the acquisition date concept are as follows:

Transfer of control. This is the date when the acquirer obtains control over decision-making in the target company, either by acquiring a majority of voting shares or by other means that confer the power to direct operations and activities.
Legal transfer of ownership. The legal transfer of ownership typically coincides with the legal transfer of shares or assets, although legal and accounting control may sometimes differ. Accounting guidelines prioritize substance over form, emphasizing the point at which the acquiring entity obtains actual control.
Recognition of assets and liabilities. On the acquisition date, all identifiable assets acquired and liabilities assumed are recognized and measured at fair value by the acquiring company.
Measurement reference point. The acquisition date establishes the measurement date for determining the fair values of consideration transferred, assets acquired, and liabilities assumed.
Consolidation commences. From the acquisition date forward, the acquirer consolidates the financial statements of the acquired entity into its own financial reporting.
Determination of goodwill or bargain purchase. Goodwill (or gain on bargain purchase) is calculated based on fair values determined at the acquisition date, comparing the purchase consideration to the net fair value of identifiable assets acquired minus liabilities assumed.