Wiley International Trends in Financial Reporting under IFRS: Including Comparisons with US GAAP, Chinese GAAP, and Indian GAAP

CHAPTER 20

BUSINESS COMBINATIONS (IFRS 3)

1. OBJECTIVE

1.1 This Standard applies to transactions or other events that meet the definition of the term “business combination.” It does not apply to transactions such as formation of a joint venture, the acquisition of an asset or a group of assets that does not constitute a “business,” and the combination of entities or businesses under “common control.”

1.2 The Standard lays down principles of recognition and measurement to be used by an acquirer in a business combination in recognizing and measuring identifiable assets acquired, the liabilities assumed, and noncontrolling interest, if any, in its financial statements; recognizing and measuring goodwill acquired in the business combination or gain from a bargain purchase; and determining the disclosures that are required to enable users of financial statements to evaluate the nature and financial effects of the business combination.

2. SYNOPSIS OF THE STANDARD

The summary of this Standard and its key terms is presented next.

2.1 The Standard defines a business combination as a transaction or other events in which an “acquirer” obtains “control” of one or more “businesses.”

2.1.1 A business consists of “inputs” and “processes” applied to those inputs that have the ability to create “outputs.” In other words, an integrated set of activities and assets requires these elements: inputs and processes applied to those elements, which together are or will create outputs.

2.1.2 A business ...