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Business Combinations Phase II

Date recorded:

The IASB staff outlined a slightly modified schedule from that proposed in January 2006. This was accepted.

Joint Ventures

The Board agreed that the formation of a joint venture is, by definition, not a business combination. None of the parties to a joint venture have the ability to control the joint venture. The ED of Amendments to IFRS 3 defined a business combination in terns of 'a transaction or event in which an acquirer obtains control of one or more businesses.'

The Board supported a staff recommendation that they should not seek to develop a common definition of a joint venture as part of the Business Combination project; nor should the scope of this project be extended to accounting for joint ventures.

Definition of a business combination

The Board discussed alternatives put to them by the staff related to the definition of a business combination. Board Members debated the merits and faults of the alternatives proposed by the staff. The Board agreed to explore, as its preferred option, whether it would be possible to develop a robust definition of a business combination that is principles-based and would capture those transactions the Board intended it to. (The Board acknowledged this would be a fairly long-term project.) As a fall-back position, the Board agreed that the final Standard should retain the Business Combinations II ED definition of a business combination and provide supplemental guidance that clarifies that particular transactions for which some argue do not result in one entity obtaining control of another are still business combinations.

Board members stressed the need for clarity between acquiring control and a change in control, noting that a change in control need not be an economic event.

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.