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IFRS 3 — Business Combinations

Effective date:

First effective as Canadian GAAP under Part I for interim and annual financial statements relating to fiscal years beginning on or after January 1, 2011, except for subsequent amendments.  Earlier application of Part I was permitted.

Published by the IASB:

January 2008

Included in Part I of CPA Canada Handbook:

January 2010

Reach out to our IFRS 3 Specialist

Sean Morrison

Overview

IFRS 3, Business Combinations outlines the accounting when an acquirer obtains control of a business (e.g. an acquisition or merger). Each business combinations are accounted for using the "acquisition method", which requires:

  • Identifying the acquirer; 
  • Determining the acquisition date; 
  • Recognizing and measuring the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree; and 
  • Recognizing and measuring goodwill or a gain from a bargain purchase.

IFRS 3 is premised on accounting for the business over which control has been acquired – therefore, consideration exchanged that is not part of the exchange for the business is accounted for as a separate transaction in accordance with other IFRSs. The acquirer recognizes the consideration transferred (including contingent consideration) at its acquisition-date fair value. The acquirer expenses all acquisition-related costs associated with the business combination. The acquirer recognizes, as of the acquisition date, separately from goodwill, the identifiable assets acquired and liabilities assumed and any non-controlling interest in the acquiree. The acquirer measures the identifiable assets acquired and liabilities assumed at their acquisition-date fair values (unless another measurement basis is required by IFRS 3). The acquirer recognizes as goodwill the excess of: a) the consideration transferred, any non-controlling interest and the fair value of any previously held equity interest in the acquiree over b) the net identifiable assets acquired. Where this amount results in a deficiency, it is considered to be a bargain purchase gain and is recognized in profit or loss. In general, an acquirer measures and accounts for assets acquired and liabilities assumed in a business combination after it has been completed in accordance with other applicable IFRSs. However, IFRS 3 provides accounting requirements for reacquired rights, contingent liabilities, contingent consideration and indemnification assets.

History of IFRS

The following table shows the history of this standard subsequent to the adoption of IFRS in Canada. 

Date1

Development

Comments

Included in Part I of the CPA Canada Handbook2

January 2010

Part I of the CPA Canada Handbook issued

Effective for interim and annual financial statements relating to fiscal years beginning on or after January 1, 2011. Earlier application is permitted.

January 2010

May 6, 2010

Amended by Annual Improvements to IFRSs 2010 (measurement of non-controlling interests, replaced share-based payment awards, transitional arrangements for contingent consideration)

 

Paragraphs 19, 30 and B56 have been amended and paragraphs B62A and B62B added to limit the scope of the measurement choice for certain components of non-controlling interest and to clarify the accounting for unreplaced and voluntarily replaced share-based payment awards. As well, paragraphs 65A-65E have been added to this standard and conforming changes have been made to IFRS 7 Financial Instruments: Disclosures, IAS 32 Financial Instruments: Presentation and IAS 39 Financial Instruments: Recognition and Measurement to provide transition guidance on how to account for contingent consideration from a business combination that occurred before the effective date of IFRS 3.

The amendments are effective for annual periods beginning on or after July 1, 2010. Earlier application is permitted.

July 2010

December 12, 2013

Amended by Annual Improvements to IFRSs 2010–2012 Cycle (contingent consideration)

 

The amendments clarify the accounting for contingent consideration in a business combination.

The amendments are effective business combinations for which the acquisition date is on or after July 1, 2014. Earlier application is permitted.

March 2014

December 12, 2013

Amended by Annual Improvements to IFRSs 2011–2013 Cycle (scope exception for joint ventures)

 

The amendments modify the scope exception for joint ventures to exclude the formation of all types of joint arrangements and clarify that the scope exception applies only to the financial statements of the joint arrangement itself.

The amendments are effective for annual periods beginning on or after July 1, 2014. Earlier application is permitted.

 

March 2014

June 17, 2015

The review concluded that there is general support for IFRS 3 and its related Standards; however, there are several aspects where additional research is needed. As a result, the IASB added to its agenda two research projects: Definition of a business and Goodwill

 Not applicable

December 12, 2017

Amended by Annual Improvements to IFRSs 2015 – 2017 Cycle (obtaining control of a business that is a joint operation)

The amendment to IFRS 3 clarifies that when an entity obtains control of a business that is a joint operation, it remeasures previously held interests in that business.

The amendment is effective for annual periods beginning on or after January 1, 2019. Earlier application is permitted.

April 2018

Notes

  1. For further details of relevant developments prior to this, please refer to our Deloitte Global section.
  2. Newly issued, amended or revised IFRSs are part of Canadian GAAP only after they are approved by the Accounting Standards Board in accordance with its due process.

The above summary does not include details of consequential amendments made as the result of other projects.

Related Interpretations

Related IFRIC Agenda Rejection Notices

The rejection notices are available in our Deloitte Global section.

  • IFRS 3/IFRS 10 — Identification of the acquirer in accordance with IFRS 3 and the parent in accordance with IFRS 10 in a stapling arrangement (May 2014)
  • IAS 28 and IFRS 3 — Associates and common control (May 2013)
  • IFRS 3 & IFRS 2 — Accounting for reverse acquisitions that do not constitute a business (March 2013)
  • IFRS 3 — Continuing employment (January 2013)
  • IFRS 3 — Acquirer in a reverse acquisition (September 2011)
  • IFRS 3 — Business combinations involving newly formed entities: business combinations under common control (September 2011)
  • IFRS 3 — Business combinations involving newly formed entities: factors affecting the identification of the acquirer (September 2011)
  • IFRS 3 — Unreplaced and voluntarily replaced share-based payment awards (November 2009)
  • IFRS 3 — Measurement of NCI (November 2009)
  • IFRS 3 — Earlier application of revised IFRS 3 (July 2009)
  • IFRS 3 — Acquisition related costs in a business combination (July 2009)
  • IFRS 3 — Customer-related intangible assets (March 2009)
  • IFRS 3 — Reassessments on a business combination (May 2007)
  • IFRS 3 — Are puts or forwards received by minority interests in a business combination contingent consideration? (November 2006)
  • IFRS 3 — ‘Transitory’ common control (March 2006)
  • IFRS 3 — Whether a new entity that pays cash can be identified as the acquirer (March 2006)
  • IFRS 3 — Acquisition of a minority interest (February 2005)
  • Non-monetary exchanges of assets (April 2003)
  • The seller’s contingent consideration (July 2002)
  • Exchanges of businesses or other non-monetary assets for an interest in a subsidiary, joint venture or associates (July 2002)

AcSB’s IFRS Discussion Group meetings

  • January 10, 2018 - IFRS 3: Transaction Price Allocation
  • October 5, 2017 - IFRS 3 and IAS 39: Transaction Price Allocation
  • May 30, 2017 - IFRS 3 and IAS 39: Transaction Price Allocation
  • November 29, 2016 - IFRS 3 and IAS 39: Transaction Price Allocation and Settlement of a Shareholder Loan
  • September 13, 2016 - IFRS 3 and IAS 39: Transaction Price Allocation and IFRS 3 and IFRS 11: Definition of a Business and Accounting for Previously Held Interests
  • May 31, 2016 - IFRS 3 and IFRS 11:  Remeasurement of Previously Held Interests – Obtaining Control or Joint Control in a Joint Operation that Constitutes a Business
  • May 31, 2016 - IFRS 2 and IFRS 3: Vested Share Options
  • May 31, 2016 - IFRS 3, IAS 16 and IAS 37: Contingent Consideration in an Asset Purchase
  • December 3, 2015 - IFRS 2 and IFRS 3: A Reverse Takeover Involving Joint Control
  • September 10, 2015 - IFRS 3 and IAS 12: Uncertain Tax Positions Acquired in a Business Combination
  • September 10, 2015 - IFRS 3, IAS 16 and IAS 37: Contingent Consideration in an Asset Purchase
  • September 10, 2015 - IFRS 3: Various Issues 
  • September 10, 2015 - IFRS 3: Business Combinations
  • December 9, 2014 - IFRS 3, IFRS 6, IFRS 10 and IAS 16: Acquisition of an Entity Holding a Single Asset
  • September 11, 2014 - IFRS 3, IAS 16 and IAS 37: Contingent Consideration in an Asset Purchase and IFRS 3, IFRS 15, IAS 18 and IAS 37: Contingent Consideration in an Asset Sale 
  • June 12, 2014 - IFRS 3, IFRS 13 and IAS 37: Asset Retirement Obligations Assumed in a Business Combination or Asset Purchase

Amendments under consideration

Related Interpretations

Correction list for hyphenation

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