What is the measurement period and how do adjustments work during this window?

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AcadiFi · Accepted Answer

The **measurement period** is a window after acquisition (up to one year) during which the acquirer can adjust provisional amounts if new information emerges about conditions existing at the acquisition date. **Rules:** - Maximum length: 1 year from acquisition date - Only adjusts for facts existing at acquisition (not subsequent events) - Adjustments affect goodwill (retrospective under IFRS; prospective under US GAAP post-ASU 2015-16) - Must disclose nature and reason **US GAAP change (ASU 2015-16):** Since 2016, US filers no longer restate prior periods. Instead, they recognize the cumulative effect in the period the adjustment is identified, with a disclosure line item. **Example — Hawthorne Industries acquired Juniper Systems 2025-09-01:** - Initial goodwill: $85M (provisional PP&E fair value of $120M) - Q2 2026 appraisal completes: actual PP&E fair value is $135M - Adjustment within measurement period: PP&E +$15M, Goodwill -$15M, DTL +$3.75M (25% rate), Goodwill +$3.75M net change - Net: Goodwill decreases by $11.25M ```mermaid flowchart LR A[Acquisition
Date] --> B[Provisional
Amounts] B --> C{New info
within 1yr?} C -->|Yes| D[Adjust
Goodwill] C -->|No| E[Final] D --> E ``` **Out-of-scope changes:** Economic shifts, customer losses, post-closing litigation events — these hit current period P&L, not goodwill. After 12 months, all adjustments must go through earnings, regardless of whether they relate to acquisition-date facts.

What is the measurement period and how do adjustments work during this window?

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