Business combinations under common control

Date recorded:

Business Combination under Common Control – Cover note – Agenda paper 23

The Board continued its discussions on the business combinations under common control (BCUCC) project. In its December 2017 meeting, the Board tentatively decided on the scope of the project. In this session, the Staff presented the following paper:

  • Starting point in developing proposals (AP 23A)

Next steps

The Staff expect to issue a discussion paper as the next consultative document.

Starting point in developing proposals – Agenda Paper 23A


In this paper, the Staff considered what the best starting point is for developing proposals for BCUCC transactions.

In December 2017, the Staff held discussions with the Accounting Standards Advisory Forum and the Emerging Economies Group on this topic. Neither group expressed a clear preference regarding the starting point for the model.

Staff analysis

The Staff considered three alternatives:

  • (a) starting from scratch;
  • (b) starting from existing Standards, i.e. using the acquisition method in IFRS 3; or
  • (c) starting from existing practice, i.e. using a variation of the predecessor approach.

The Staff observed that these alternatives overlap to some extent and the proposals developed under each could be very similar.

On balance, the Staff preferred starting with the acquisition method in IFRS 3. This is because the acquisition method has withstood the test of time – it may have its faults but its concepts are well understood and it is already being applied to some BCUCC transactions. In contrast to the predecessor approach, it will provide a clear starting point for the Board to develop the model further.

The Staff emphasised that using the acquisition method as the starting point does not mean that all BCUCC transactions will be accounted for under this method. The overriding objective in developing the model is to provide useful information to users that is cost-beneficial. As such, the acquisition method will only be applied if it will provide useful information about a particular BCUCC transaction. If not, the Board will have to consider other approaches to account for these transactions in order to provide useful information at a cost that justifies the benefits.

The Staff did not recommend starting with the predecessor approach. Although it is the most prevalent approach in practice, there is significant diversity in how it is applied, including how the acquired assets and liabilities should be measured and whether comparative figures should be restated. The Board would have to spend a considerable amount of time just to agree on a clear starting point for this method.

Staff recommendation

The Staff recommended that the Board use the acquisition method in IFRS 3 as the starting point in developing proposals for transactions within the scope of the BCUCC project.

Next steps

The Staff will discuss the following topics in future Board meetings:

  • (a) how to identify transactions within the scope of the project for which the acquisition method would provide useful information, and
  • (b) how to account for transactions within the scope of the project for which the acquisition method would not provide useful information that is cost-beneficial. The Board could either start from scratch or consider a variation of the predecessor method for these transactions.


The Board approved the Staff recommendation.

Most Board members believed that the acquisition method is the logical starting point for BCUCC transactions. One Board member observed that IFRS 3 does not provide any clear reasons for excluding BCUCC transactions from its scope so using IFRS 3 as a starting point is, in his view, merely completing an unfinished piece of work within that Standard.

Given the preference to use the predecessor approach in practice, the Board realised that it will have to perform significant outreach activities to explain its position to the stakeholders. They will also have to bear cost-benefits in mind as the project evolves because this will be a significant change for jurisdictions in which BCUCC transactions are common.

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