Business combinations under common control

Date recorded:

In the agenda paper for the session, the staff recommended that, at this stage, the IASB proceed with a narrow scope project that would focus on top priority issues – business combinations under common control that are currently excluded from the scope of IFRS 3 and group restructurings that are not business combinations. The staff also recommended that the IASB consider the need to clarify the description of business combinations under common control, including the meaning of ‘common control’. They did not recommend considering other types of transactions under common control, transfer pricing or the broader new basis issues at this stage.

The Senior Technical Manager introduced the paper and asked the Board members whether they had any comments on the paper and whether they agreed with the staff recommendations in the paper.

One Board member noted that she agreed with the staff recommendations in the paper; however, she cautioned on stating that ‘group restructurings that are not business combinations’ would be included within the scope of the project. She observed that group restructurings was a very broad category of transactions, and could include transfers of assets that were not businesses, which were not within the scope of the project. She noted that the wording should not read as though the project would deal with all group restructurings.

A Board member, who had attended the recently held IOSCO meeting, noted that a lot of concern had been expressed by regulators that there was no IFRS standard that covered these types of transactions. As a result, there were differences in acceptable treatment across jurisdictions because of differing regulations in each, which provided an opportunity for regulation shopping. He noted the regulators had stressed the importance of the Board addressing this issue to enable consistent application of IFRS in this area.

Another Board member who was also present at the IOSCO meeting added that some of the regulators felt they could get to answers they thought were sensible answers using existing IFRS literature, but were concerned about areas where they were coming to different views. She further noted that these regulators had noted that even if the Board could eliminate accounting they believed was wrong and narrow the population down to what would be acceptable within the general principles of IFRS; that would be helpful to them. 

Another Board member who had attended the IFRS Foundation conference in Singapore in May noted that many constituents in attendance at that meeting had expressed similar concerns with respect to the differences that were arising across jurisdictions in dealing with this issue, and the need for the IASB to urgently address the issue.

All Board members agreed with the staff recommendations in the paper.

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