Business Combinations

In April 2001 the International Accounting Standards Board (Board) adopted IAS 22 Business Combinations, which had originally been issued by the International Accounting Standards Committee in October 1998. IAS 22 was itself a revised version of IAS 22 Business Combinations that was issued in November 1983.

In March 2004 the Board replaced IAS 22 and three related Interpretations (SIC-9 Business Combinations—Classification either as Acquisitions or Unitings of Interests, SIC-22 Business Combinations—Subsequent Adjustment of Fair Values and Goodwill Initially Reported and SIC-28 Business Combinations—‘Date of Exchange’ and Fair Value of Equity Instruments) when it issued IFRS 3 Business Combinations.

Minor amendments were made to IFRS 3 in March 2004 by IFRS 5 Non-current Assets Held for Sale and Discontinued Operations and IAS 1 Presentation of Financial Statements (as revised in September 2007), which amended the terminology used throughout the Standards, including IFRS 3.

In January 2008 the Board issued a revised IFRS 3. Please refer to Background Information in the Basis for Conclusions on IFRS 3 for a fuller description of those revisions.

In October 2018, the Board amended IFRS 3 by issuing Definition of a Business (Amendments to IFRS 3). This amended IFRS 3 to narrow and clarify the definition of a business, and to permit a simplified assessment of whether an acquired set of activities and assets is a group of assets rather than a business.

In May 2020, the Board amended IFRS 3 by issuing Reference to the Conceptual Framework. This updated a reference in IFRS 3 and made further amendments to avoid unintended consequences of updating the reference.

Other Standards have made minor consequential amendments to IFRS 3. They include Improvements to IFRSs (issued in May 2010), IFRS 10 Consolidated Financial Statements (issued May 2011), IFRS 13 Fair Value Measurement (issued May 2011), Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27) (issued October 2012), IFRS 9 Financial Instruments (Hedge Accounting and amendments to IFRS 9, IFRS 7 and IAS 39) (issued November 2013), Annual Improvements to IFRSs 2010–2012 Cycle (issued December 2013), Annual Improvements to IFRSs 2011–2013 Cycle (issued December 2013), IFRS 15 Revenue from Contracts with Customers (issued May 2014), IFRS 9 Financial Instruments (issued July 2014), IFRS 16 Leases (issued January 2016), IFRS 17 Insurance Contracts (issued May 2017), Annual Improvements to IFRS Standards 2015–2017 Cycle (issued December 2017), Amendments to References to the Conceptual Framework in IFRS Standards (issued March 2018) and Amendments to IFRS 17 (issued June 2020).

CONTENTS

from paragraph

INTERNATIONAL FINANCIAL REPORTING STANDARD 3 BUSINESS COMBINATIONS

OBJECTIVE 1

SCOPE 2

IDENTIFYING A BUSINESS COMBINATION 3

THE ACQUISITION METHOD 4

Identifying the acquirer 6

Determining the acquisition date 8

Recognising and measuring the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree 10

Recognising and measuring goodwill or a gain from a bargain purchase 32

Additional guidance for applying the acquisition method to particular types of business combinations 41

Measurement period 45

Determining what is part of the business combination transaction 51

SUBSEQUENT MEASUREMENT AND ACCOUNTING 54

Reacquired rights 55

Contingent liabilities 56

Indemnification assets 57

Contingent consideration 58

DISCLOSURES 59

EFFECTIVE DATE AND TRANSITION 64

Effective date 64

Transition 65

REFERENCE TO IFRS 9 67A

WITHDRAWAL OF IFRS 3 (2004) 68

APPENDICES

A Defined terms

B Application guidance

C Amendments to other IFRSs

APPROVAL BY THE BOARD OF IFRS 3 ISSUED IN JANUARY 2008

APPROVAL BY THE BOARD OF DEFINITION OF A BUSINESS ISSUED IN

OCTOBER 2018

APPROVAL BY THE BOARD OF REFERENCE TO THE CONCEPTUAL FRAMEWORK ISSUED IN MAY 2020

FOR THE ACCOMPANYING GUIDANCE LISTED BELOW, SEE PART B OF THIS EDITION

• ILLUSTRATIVE EXAMPLES
• APPENDIX
• Amendments to guidance on other IFRSs

FOR THE BASIS FOR CONCLUSIONS, SEE PART C OF THIS EDITION

• BASIS FOR CONCLUSIONS
• APPENDIX TO THE BASIS FOR CONCLUSIONS
• Amendments to the Basis for Conclusions on other IFRSs
• DISSENTING OPINIONS

International Financial Reporting Standard 3 Business Combinations (IFRS 3) is set out in paragraphs 1–68 and Appendices A–C. All the paragraphs have equal authority. Paragraphs in bold type state the main principles. Terms defined in Appendix A are in italics the first time they appear in the IFRS. Definitions of other terms are given in the Glossary for International Financial Reporting Standards. IFRS 3 should be read in the context of its objective and the Basis for Conclusions, the Preface to IFRS Standards and the Conceptual Framework for Financial Reporting. IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors provides a basis for selecting and applying accounting policies in the absence of explicit guidance.