Deloitte comment letter on discussion paper on business combinations under common control
Deloitte's IFRS Global Office has submitted a letter of comment to the European Financial Reporting Advisory Group (EFRAG) and the Organismo Italiano di Contabilita (OIC) on their Discussion Paper Accounting for business combinations under common control.
The main goal of the EFRAG's paper published in October 2011 is to create a discussion on the current lack of guidance and the resulting differences of accounting under IFRS for business combinations between entities under common control.
We support the EFRAG's initiatives on achieving this goal. However, we believe the EFRAG could achieve more by being part of a formal working relationship with the IFRS Foundation. In a speech given in Mexico earlier this year, Hans Hoogervorst, the chairman of the IASB, stressed that the IASB is trying to establish a mechanism for involving the National Standard Setters more in the process of developing standards. EFRAG, as an important regional standard setter, could play an important role in this process.
As concerns the discussion paper itself, we state in the comment letter that:
... any project on business combinations under common control should begin with a general exploration of the accounting concepts to be applied to transactions under common control, to allow robust and principle-based guidance to then be developed for particular species of common control transactions. We continue to believe that any in-depth analysis of the principles to be applied to common control transactions is a necessary precursor to the development of guidance on specific areas, such as those considered in the discussion paper.
In our comment letter we also point to other activities in the field where national standard setters have addressed different aspects of the topic under discussion. This duplication of efforts or these concurrent but not coordinated efforts are to our mind another case in point for supporting the infrastructure envisaged by the IFRS Foundation.