• Added to Agenda at December 2007 IASB Meeting

Background

This project addresses accounting for combinations between entities or businesses under common control in the acquirer's consolidated and separate financial statements. Specifically, the scope of the project is:

• Define what a common control transaction is (review of the description of a combination between entities or businesses under common control currently in IFRS 3.10-13).
• Include demergers and spin offs.
• Consider accounting in both the separate and consolidated financial statements.

Timetable

• Click for IASB Project Timetable

Discussion at the December 2007 IASB Meeting

The IASB staff presented an agenda proposal to address common control transactions. The staff noted that a number of requests had been received to add a project on common control transactions to its agenda. Staff proposed that the scope of any such project on common control transactions be limited to accounting for combinations between entities or businesses under common control in the acquirer's consolidated and separate financial statements. They also considered that the project should investigate whether the description of a combination between entities or businesses under common control could be clarified. The staff recommended not to extend the project scope beyond combinations between entities or businesses under common control.

The IASB research director put forward the recommendation that this project be added to the agenda. The IASB research director noted that this was a significant issue in Australasia and has also been raised by constituents in Europe as an issue. It was noted that some jurisdictions already have their own common control standard. The IASB research director recommended that the project should be narrow in scope so as not to capture all common control transactions (for example, transfer pricing issues would be excluded).

The Board discussed the scope of the potential common control transaction project at length. One Board member noted that spin offs and demergers was the bigger issue within common control transactions and that this issue should be addressed as part of the common control project. Other Board members and staff agreed. Another Board member noted that the examples provided in the staff proposal were all 100% owned subsidiaries, and that the real issue arises when there is a minority interest.

The staff proposed the following scope for the common control transactions project:

• Define what a common control transaction is.
• Include demergers and spin offs.
• Consider accounting in both the separate and consolidated financial statements.

The process to be followed will be determined at a future Board meeting – that is, whether the project would include a discussion paper, or whether the project would go straight to the Exposure Draft stage.

The Board agreed with the revised scope and agreed to add the item to the technical agenda (8 in favour).