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IFRS 3 — Acquisition of a group of assets

Date recorded:

Agenda decisions to finalise — Agenda Paper 4


In June 2017, the IC discussed how an entity should account for the acquisition of a group of assets that does not constitute a business. Specifically, the submitter asked how the transaction price should be allocated to the identifiable assets acquired and liabilities assumed applying IFRS 3.2(b) when:

  • the sum of the individual fair values of the identifiable assets and liabilities in the group differs from the transaction price, and
  • the group includes identifiable assets and liabilities initially measured both at cost and at an amount other than cost.

The IC tentatively concluded that there are two reasonable ways to interpret the requirements of IFRS 3.2(b). The IC also tentatively decided not to add the issue to its agenda on the grounds that there is not sufficient evidence that the two views would lead to materially different outcomes in practice.

Staff analysis of comment letters received

Ten comment letters were received. Seven of the respondents disagreed with the IC’s decision not to add the issue to its agenda. While some respondents preferred one approach over the other, most respondents were concerned with the anomalous outcomes that could arise under both approaches and that the issue will likely become more widespread with the forthcoming amendments to the definition of a business in IFRS 3. However, the respondents did not provide any quantitative evidence of the frequency with which transactions that could lead to materially different outcomes occur, the significance of the different outcomes or how widespread they are.

Apart from a particular fact pattern raised by one of the respondents which the Staff analysed and concluded would unlikely result in a material difference between the two views in practice, no significant new issues were raised.

In light of the above, the Staff do not recommend that the IC or the Board add the matter to their standard-setting agendas.

Staff recommendation

The Staff recommend that the IC finalise the agenda decision.


The IC narrowly approved the Staff’s recommendation. However, the Board will monitor this issue and proactively seek feedback from stakeholders on the significance of the issue after the revised definition of a business takes effect.
There were mixed views from the IC as to whether standard-setting activities should be undertaken on this issue. Those who preferred doing more gave the following reasons: (1) the majority of respondents to the tentative agenda decision believed that standard-setting activities are necessary; (2) the number of transactions that will be classified as asset acquisitions as opposed to business combinations will likely increase under the revised definition of a business; and (3) it reflects poorly on the IC to allow two alternatives each of which is imperfect.
Those members who preferred not to undertake standard-setting activities at this stage believed that it is not feasible on a cost-benefit basis. They acknowledged that neither of the approaches is perfect, but there is no compelling evidence to justify the costs of standard-setting – costs not only to the IC or the Board, but to the system including stakeholders as a whole. This point was also emphasised by one of the Board members present at the meeting who said that this issue would not make it to the Board’s priority list. The Staff also said that it is unlikely that the issue could be resolved by a narrow-scope amendment to IFRS 3 given that there are anomalies with both approaches and stakeholders have strong and mixed views on which one is more appropriate.

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