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Business Combinations under Common Control – International Accounting Standards Board

Date recorded:

At its meeting on January 29, 2020, the IASB discussed feedback on its tentative decision on when each measurement approach would apply to transactions within the scope of the project and explored whether and, if so, how the exemption and the exception could be extended to entities whose equity instruments are traded in a public market. The Board was not asked to make any decisions. The IASB tentatively decided that when a receiving entity in a business combination under common control reports on that combination by applying a predecessor approach it would be required:

  1. to measure consideration paid in assets at the carrying amounts of those assets at the date of the combination;
  2. to measure consideration in the form of incurred liabilities towards the transferor—or liabilities assumed from the transferor—at the carrying amounts of those liabilities, as determined in accordance with applicable IFRS Standards, on the initial recognition of those liabilities at the date of combination;
  3. to recognize transaction costs as an expense in the statement of profit or loss in the period in which they are incurred;
  4. to recognize costs related to the issue of debt or equity instruments in accordance with IAS 32 and IFRS 9; and
  5. to recognize as a change in equity any difference between the consideration paid and the carrying amounts of assets and liabilities received.

The Board tentatively decided not to prescribe: how a receiving entity would measure consideration paid in its own shares; and in which component or components of its equity a receiving entity would present any difference between the consideration paid and the carrying amounts of assets and liabilities received. These tentative decisions complete the Board’s discussions about how a predecessor approach would be applied by a receiving entity. At a future meeting, the Board will discuss what information an entity should disclose about its transactions within the scope of the project. The Board will also decide what type of consultation document to publish for this project and whether to begin the balloting process for that document.

Review the IASB Update and podcast on the Board's Web site.

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