IASB publishes proposed amendments to IFRS 3 to update a reference to the Conceptual Framework

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May 30, 2019

On May 30, 2019, the International Accounting Standards Board (the Board) published an exposure draft "Reference to the Conceptual Framework (Proposed amendments to IFRS 3)" with three proposed amendments to IFRS 3 "Business Combinations" that would update an outdated reference in IFRS 3 without significantly changing its requirements. Comments are requested by September 27, 2019.

 

Background

In March 2018, the IASB issued the 2018 Conceptual Framework and most references to the Framework included in IFRS Standards® were updated to the 2018 Framework at that time. However, paragraph 11 of IFRS 3, Business Combinations, which still refers to the 1989 Framework, was not updated as this could have caused conflicts for entities applying IFRS 3.

Potential conflicts occur as the definition of assets and liabilities in the 2018 Framework differ to those in the 1989 Framework potentially leading to day 2 gains or losses post-acquisition for some balances recognized.

The IASB has now identified three possible amendments to IFRS 3 that would update IFRS 3 without significantly changing its requirements.

 

Suggested changes

The changes proposed in ED/2019/3 Reference to the Conceptual Framework (Proposed amendments to IFRS 3):

  • update IFRS 3 so that it refers to the 2018 Conceptual Framework instead of the 1989 Framework;
  • add to IFRS 3 a requirement that, for transactions and other events within the scope of IAS 37 or IFRIC 21, an acquirer should apply IAS 37 or IFRIC 21 (instead of the Conceptual Framework) to identify the liabilities it has assumed in a business combination; and
  • add to IFRS 3 an explicit statement that an acquirer should not recognize contingent assets acquired in a business combination.

The exposure draft also notes alternative approaches considered by the Board as well as the Board's reasons for not choosing those.

Comments on the proposed changes are requested by September 27, 2019.

 

Effective date

The exposure draft does not contain a proposed effective date for the amendments as the intention is to decide on it after the exposure period. However, it is already clear that early application would be permitted if an entity also applies all other updated references (published together with the updated Conceptual Framework) at the same time or earlier.

 

Additional information

 

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