FASB issues new M&A accounting standard

NEW YORK, Dec 4 (Reuters) - The Financial Accounting Standards Board, which sets U.S. accounting rules, issued new rules for accounting for business combinations on Tuesday.

The rules, known as FAS 141 and FAS 160, are intended to simplify and converge with international rules on how companies account for mergers, acquisitions, noncontrolling interests and other business combinations in financial statements.

The rules take effect for fiscal years beginning after Dec. 15, 2008, FASB said.

It is the first major joint project that the FASB conducted with its international counterparts at the International Accounting Standards Board.

The rules are part of the FASB's push toward "fair value," or mark-to market accounting. FAS 140, for example, requires a company making an acquisition to recognize all the assets acquired and liabilities assumed in the transaction and uses the acquisition date's fair value as its main measurement tool.

It changes the way companies account for negative goodwill, which is the gain a company records when it buys an asset for less than its current mark-to-market price.

The rules also require the acquirer to tell investors the information they need to "evaluate and understand the nature and financial effect of the business combination," FASB said in a statement. (Reporting by Emily Chasan, editing by Leslie Gevirtz)