Business Combinations Phase II

Date recorded:

The IASB approved expanding the scope of its Business Combinations Phase II project to include the following minority interests issues:

  • Decreases in the parent's ownership interest after a business combination (both with and without loss of control).
  • Display of minority interests in the consolidated income statement or statement of changes in equity.
The IASB also approved expanding the scope of its Business Combinations Phase II project to also include the following:
  • Should businesses or other non-monetary assets exchanged for an interest in a subsidiary be accounted for at fair value at the date of the transaction or at previous carrying amounts?
  • How should any gain or loss arising on the transaction be reported?

A discussion by the FASB whereby they agreed to provide the following guidance to clarify that recording a loss allowance for the estimated uncollectible amounts is not appropriate at the date of acquisition was noted: "Acquired receivables (including loans) would be measured at fair value at the date of acquisition; thus, a separate allowance for uncollectible amounts would not be established upon initial recognition of those receivables." The Board agreed that this direction would be followed in the IASB project.

The Board noted a FASB decision that acquired assets should be measured at fair value less costs to sell if, at the date of acquisition, the assets meet the criteria in paragraph 32 of FASB Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, for classification as assets held for sale. The IASB believed this arose out of the US "assets held for sale" concept, which does not exist in IAS literature. Consequently the IASB does not plan to follow the same route.

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