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IASB consults on changes to IFRS 3 for mergers and acquisitions within a group

The International Accounting Standards Board (IASB) has launched a public consultation on possible new accounting requirements in relation to transactions that involve transfers of businesses between companies within the same group.

Mergers and acquisitions involving companies within the same group are very common, but companies report similar business combinations in different ways. This diversity makes it difficult for investors to understand the effects of such transactions and to compare companies that undertake similar transactions.

The IASB is considering whether and when the acquisition method should be used, and when a prescribed book-value method should be used for business combinations under common control. Reporting by the controlling party would not be affected.

Acquisition model

The acquisition method would be used when the receiving company has non-controlling shareholders.

The cost of applying the acquisition method might not always be justified for privately held companies and therefore special conditions for such companies are suggested:

Book-value method

Where the receiving company did not have non-controlling shareholders, book-value information would be provided using one single prescribed method:

The deadline for responses to the discussion paper: Business Combinations under Common Control is 1 September 2021.

For further information, please contact Helen Jones or Paul Merris.

authors:paul-merris,authors:helen-jones