Related Party Combinations – PEAC

Date recorded:

At its meeting on September 10, 2019, the Private Enterprise Advisory Committee (PEAC) discussed the input received from the Related Party Combinations Working Group. This included examples of common transactions and feedback on the frequency and variations of these transactions. The Committee discussed whether there are other common transactions that should also be explored. Overall, Committee members advised considering more complex transactions, such as those structured through holding companies and trusts. The Committee also recommended considering transactions that involve both related and unrelated parties.

The Committee also discussed whether the Board should consider amending the guidance in Section 1582, Business Combinations, relating to the definition of a business. In particular, the Committee discussed the merits of introducing a simplified test to determine whether the assets acquired in a combination constitute a business similar to the concentration test from IFRS 3, Business Combinations. The Committee advised that adding the simplified test to Section 1582 will help reduce challenges with determining whether the assets acquired in a transaction constitute a business.

The Committee also discussed whether the definition of a business should be addressed concurrently with the related party combinations project. The Committee advised that amendments to the definition of a business in Section 1582 should not be undertaken concurrently with the related party combinations project as these projects are not interdependent on one another.

The Committee also recommended that the Board consider:

  1. clarifying the definition of a related party; and
  2. providing guidance on the accounting for a merger of entities (for example, the merger of a parent and its subsidiary where the parent company previously accounted for its subsidiary using the cost method).

The Board will consider the Committee’s feedback at its next meeting in December 2019.

Review the meeting notes on the AcSB's Web site.

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