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Deloitte comments on IFRS 3 proposals

  • Deloitte Comment Letter Image

28 Oct 2005

We have posted the Deloitte Business Combinations (PDF 103k).

On 30 June 2005, the IASB and the US Financial Accounting Standards Board (FASB) jointly published exposure drafts that would amend their business combinations standards (IFRS 3 and SFAS 141) while retaining the fundamental requirement to account for all business combinations using the purchase method of accounting, by which one party is always identified as acquiring the other. Among our comments are the following:

  • We agree that recording 100% of the fair value of all assets acquired and liabilities assumed, including goodwill attributable to the noncontrolling (minority) interest, produces more meaningful and relevant information. However, we do not believe that the costs and operational difficulties associated with recording the fair value of the acquiree as a whole are justified by the benefits of providing the information at this time.
  • Additionally, significant portions of the exposure drafts are predicated on projects that have not yet been completed (eg the Conceptual Framework project, the Financial Performance Reporting project, the Fair Value Measurements project, the Liabilities and Equity project, and new basis issues). We do not believe the Exposure Drafts should be finalised until such time as the projects forming the foundation for this standard are completed.
  • We believe the IASB should retain IFRS 3 Business Combinations, with limited modifications, and that the FASB should converge with this model. Our letter cites a range of benefits of this approach.

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