An acquiring institution should apply the acquisition method of accounting to all business combinations, including bargain purchase transactions and assisted acquisitions, in accordance with Accounting Standards Codification (ASC) Topic 805. Acquisition-date fair values of assets acquired, liabilities assumed, and consideration transferred should be measured in accordance with ASC Topic 820.
A bargain purchase occurs when the fair value of the net assets acquired in a business combination exceeds the fair value of any consideration transferred by the acquiring institution. Bargain purchase gains are reported in earnings and included in the computation of regulatory capital under the agencies' capital standards.
Fair value estimates presented in a business combination application are generally preliminary. Any estimated bargain purchase gain will be affected by retrospective adjustments made during the accounting measurement period to the acquisition-date fair values of assets acquired and liabilities assumed in the combination.
Because of concerns about the quality and composition of capital when a bargain purchase gain is expected to result from a business combination and the related fair value estimates have not yet been validated, the agencies may impose capital preservation and other conditions in their approvals of acquisitions of institutions.
Appendices to the guidance provide information regarding selected accounting and regulatory reporting requirements for business combinations.
Chief Executive Officer
Chief Financial Officer
• FDIC Regulations Governing Filing Procedures for Merger Transactions, 12 CFR Part 303, Subpart D
• Statement of Policy on Bank Merger Transactions
• Statement of Policy on Qualifications for Failed Bank Acquisitions
Interagency Supervisory Guidance on Bargain Purchases and FDIC- and NCUA-Assisted Acquisitions (PDF Help)
FDIC Regional Accountant or Robert Storch, Chief Accountant, Division of Supervision and Consumer Protection, on 202 898-8906 or firstname.lastname@example.org.
FIL-30-2010 - PDF (PDF Help)
FDIC financial institution letters (FILs) may be accessed from the FDIC's Web site at www.fdic.gov/news/news/financial/2010/index.html.
To receive FILs electronically, please visit http://www.fdic.gov/about/subscriptions/fil.html.
Paper copies of FDIC financial institution letters may be obtained through the FDIC's Public Information Center, 3501 Fairfax Drive, E-1002, Arlington, VA 22226 (1-877-275-3342 or 703 562 2200).