Accounting Standard for Business Combinations

The ACQUISITION METHOD requires IDENTIFYING which combining entity is the "ACQUIRER" – generally the entity obtaining CONTROL – based on indicators such as RELATIVE size, WHO issues consideration, and WHO dominates management of the combined entity AFTERWARD. Once identified, the acquirer applies purchase accounting FROM the acquirer's own perspective.

UNLIKE IFRS 3 (and US GAAP's ASC 350, post-2001), which treat GOODWILL as an INDEFINITE-life asset TESTED ONLY for impairment (never systematically amortised), J-GAAP requires goodwill to beSYSTEMATICALLY AMORTISED– generally on a STRAIGHT-LINE basis – over a period the entity determines is APPROPRIATE, but NOT EXCEEDING 20 YEARS, in ADDITION to being tested for IMPAIRMENT where indicators exist. This is one of the MOST SIGNIFICANT, FREQUENTLY-CITED divergences between J-GAAP and international practice – it means Japanese companies' reported profit is SYSTEMATICALLY REDUCED by goodwill amortisation EVERY period following an acquisition, in a way that companies reporting under IFRS or US GAAP simply do NOT experience (their profit is affected ONLY if and when an impairment is triggered).

Non-controlling interests are measured at their PROPORTIONATE SHARE of the acquiree's IDENTIFIABLE net assets (the "PARTIAL GOODWILL" method) – meaning goodwill is recognised ONLY in respect of the PARENT's OWN acquired interest, NOT the non-controlling interest's share. This is J-GAAP's ONLY available approach – UNLIKE IFRS 3, which OFFERS a transaction-by-transaction ELECTION between the partial goodwill method and the "FULL GOODWILL" method (measuring non-controlling interests at FAIR VALUE, recognising goodwill attributable to the ENTIRE acquiree, including the non-controlling portion).