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IFRS 3 – Acquirer in a reverse acquisition (finalised)

Date recorded:

The Committee received a request for guidance regarding whether a business that is not a legal entity could be considered an acquirer in a reverse acquisition under IFRS 3 Business Combinations.

The Committee heard comment letter feedback to its tentative agenda decision published after the July 2011 meeting which supported the decision not to take this item to its agenda. Thus, the Committee confirmed its tentative decision not to take this issue to its agenda since the issue is not widespread. However, one Committee member expressed a desire that the agenda decision highlight the clarity of current guidance as opposed to citing strictly that the issue is not widespread.

The Committee noted that under paragraph 7 of IFRS 3, the acquirer is "the entity that obtains control of the acquiree" and, in accordance with Appendix A of IFRS 3, the acquiree is "the business or businesses that the acquirer obtains control of in a business combination". Paragraph B19 of IFRS 3 states that the entity whose equity interests are acquired (the legal acquire) must be the acquirer for accounting purposes for the transaction to be considered a reverse acquisition.

The Committee also observed that a 'reporting entity' need not be a legal entity under the IASB's current Conceptual Framework. Therefore, the Committee thinks that an acquirer that is a reporting entity but not a legal entity can be considered to be the acquirer in a reverse acquisition.

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