IFRS 3 Business Combinations

IFRS 3 Objective Scope

Objective – IFRS 3 Objective Scope

1 The objective of this IFRS is to improve the relevance, reliability and comparability of the information that a reporting entity provides in its financial statements about a business combination and its effects. To accomplish that, this IFRS establishes principles and requirements for how the acquirer:

1. recognises and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree;
2. recognises and measures the goodwill acquired in the business combination or a gain from a Read more

IFRS 3 Business Combinations

IFRS 3 The acquisition method

4 An entity shall account for each business combination by applying .

5 Applying Read more

IFRS 3 Business Combinations

IFRS 3 Subsequent measurement and accounting

54 In general, an acquirer shall subsequently measure and account for assets acquired, liabilities assumed or incurred and equity instruments issued in a business combination in accordance with other applicable IFRSs for those items, depending on their nature. However, this IFRS provides guidance on subsequently measuring and accounting for the following assets acquired, liabilities assumed or incurred and equity instruments issued in a business combination:

1. reacquired rights; IFRS 3 Subsequent measurement and accounting
2. contingent liabilities recognised as of the Read more

IFRS 3 Business Combinations

IFRS 3AG Entities under common control

Appendix B Application guidance

This appendix is an integral part of the IFRS. IFRS 3AG Entities under common control

Business combinations of entities under common control (application of paragraph 2(c))

B1 This IFRS does not apply to a business combination of entities or businesses under common control. A business combination involving entities or businesses under common control is a business combination in which all of the combining entities or businesses are ultimately controlled by the same party or parties both before and after the business combination, and that control is not transitory.

B2 A group of individuals shall be regarded as controlling an entity when, as a result … Read more

IFRS 3 Business Combinations

IFRS 3AG Identifying a business combination

Appendix B Application guidance

Identifying a business combination (application of paragraph 3)

B5 This IFRS defines a business combination as a transaction or other event in which an acquirer obtains control of one or more businesses. An acquirer might obtain control of an acquiree in a variety of ways, for example:

1. by transferring cash, cash equivalents or other assets (including net assets that constitute a business);
2. by incurring liabilities; IFRS 3AG Identifying a business combination
3. by issuing equity interests; IFRS 3AG Identifying a business combination
4. by providing more than one type of consideration; or
5. without transferring consideration, including by contract alone (see paragraph 43).

B6 A business combination … Read more

IFRS 3 Business Combinations

IFRS 3AG Definition of a business

Definition of a business (application of paragraph 3)

B7 A business consists of inputs and processes applied to those inputs that have the ability to contribute to the creation of outputs. The three elements of a business are defined as follows (see paragraphs B8–B12D for guidance on the elements of a business): IFRS 3AG Definition of a business

1. Input: Any economic resource that creates outputs, or has the ability to contribute to the creation of outputs when one or more processes are applied to it. Examples include non-current assets (including intangible assets or rights to use non-current assets), intellectual property, the ability to obtain access to necessary materials or

… Read more

IFRS 3 Business Combinations

IFRS 3AG Identifying the acquirer

Identifying the acquirer (application of paragraphs 6 and 7)

B13 The guidance in IFRS 10 Consolidated Financial Statements shall be used to identify the acquirer—the entity that obtains control of the acquiree. If a business combination has occurred but applying the guidance in IFRS 10 does not clearly indicate which of the combining entities is the acquirer, the factors in paragraphs B14–B18 shall be considered in making that determination.

B14 In a business combination effected primarily by transferring cash or other assets or by incurring liabilities, the acquirer is usually the entity that transfers the cash or other assets or incurs the liabilities.

B15 In a business combination effected primarily … Read more

IFRS 3 Business Combinations

IFRS 3AG Reverse acquisitions

B19 A reverse occurs when the entity that issues securities (the legal acquirer) is identified as the acquiree for accounting purposes on the basis of the guidance in paragraphs B13–B18. The entity whose equity interests are acquired (the legal acquiree) must be … Read more

IFRS 3 Business Combinations

IFRS 3AG Recognition assets and liabilities

Recognising particular assets acquired and liabilities assumed (application of paragraphs 10–13)

B28 – B30 [Deleted]

Intangible assets

B31 The acquirer shall recognise, separately from goodwill, the identifiable intangible assets acquired in a business combination. An intangible asset is identifiable if it meets either the separability criterion or the contractual-legal criterion.

B32 An intangible asset that meets the contractual-legal criterion is identifiable even if the asset is not transferable or separable from the acquiree or from other rights and obligations. For example:

1. [deleted]
2. an acquiree owns and operates a nuclear power plant. The licence to operate that power plant is an intangible asset that meets the contractual-legal criterion for recognition separately

… Read more

IFRS 3 Business Combinations

IFRS 3AG Measurement in an bargain purchase

Measuring goodwill or a gain from a purchase

Measuring the Read more