Business combinations under common control

Date recorded:

Project Objective and Scope (Agenda Paper 23)


The IASB published its Discussion Paper DP/2020/2 Business Combinations under Common Control (BCUCC) in November 2020, with a comment letter deadline of 1 September 2021. At its December 2021 and January 2022 meetings, the IASB discussed the feedback received on the topics set out in the DP and the plan for deliberating the preliminary view.

In this session, the IASB discussed feedback received on the overall project objective and respondents’ suggestions to expand the scope of the project to address:

  • Reporting by entities involved in a BCUCC other than the receiving entity
  • Reporting of an investment in a subsidiary received under common control in separate financial statements
  • Reporting of common control transactions other than BCUCCs

Staff recommendations

The staff recommended that the project objective is updated to reflect the stage of the project and to emphasise that the project considers users of the receiving entity’s financial statements.

The staff did not recommend expanding the scope of the project to address the topics noted above.

IASB discussion

Project objective

Several IASB members voiced their support for the staff recommendation to update the project objective. One IASB member stressed that it can sometimes be difficult to identify which entity is the receiving entity and therefore it would be important to ensure that a clear definition is provided. The staff commented that the definition would be considered within the project.

Scope expansion

A number of IASB members noted their agreement with the staff proposal not to expand the scope of the project any further. One IASB member highlighted that whilst the other issues raised are valid, they should be considered separately as this project is only intended to resolve one of the known gaps in the literature and should focus solely on that.

One IASB member sympathised with the concerns raised by some respondents that there is a mismatch in the accounting treatment of transferring entities, who typically recognise the difference between consideration received and net assets transferred in profit or loss, and receiving entities who recognise this difference as goodwill or in equity. Another IASB member disagreed and noted that this disconnect was also present for third party business combinations and therefore should not be viewed any differently for BCUCC.

One IASB member suggested that the scope of the project should be expanded to consider transfers of interests in associates or joint ventures under common control and specifically to address whether the reference to consolidation procedures in paragraph 26 of IAS 28 should be included within the scope of the IFRS 3 BCUCC exemption, as it is often interpreted this way in practice. Another IASB member added that this would be better addressed within the equity method project.

IASB decision

All 11 IASB members supported the staff recommendation to update the project objective.

10 of the 11 IASB members voted in favour of the staff recommendation not to expand the scope of the project.

The Chair posed a third question for IASB members to vote on whether they supported expanding the project to consider the scoping question raised by one of the IASB members in relation to transfers of interests in associates and joint ventures under common control. 2 out of 11 IASB members voted in favour of this proposal.

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