Feedback from the joint outreach event on the accounting for business combination under IFRS
14 Jun 2014
The first joint outreach event of the European Financial Reporting Advisory Group (EFRAG), the European Federation of Financial Analysts Societies (EFFAS), the Association Belge des Analystes Financiers (ABAF), and the International Accounting Standards Board (IASB) was held on 1 April 2014. The event was part of the Post-implementation Review of IFRS 3 'Business Combinations' with the purpose of gathering views from users on the decision usefulness of the information resulting from the current accounting and disclosure requirements for business combinations, as well as what improvements, if any, are needed, and why.
During the event, selected case studies on business combination transactions taken from published IFRS financial statements were presented and discussed. The key messages provided by participants included the following:
- Timeliness of information received through the annual accounts is a concern given that markets react on the day an acquisition is announced;
- it would be relevant to understand the reasons for a business combination from the perspective of both the seller and the buyer;
- there is a need for more transparency regarding expected synergies;
- adjustments to contingent consideration are not considered part of performance and result in counter-intuitive accounting;
- there is a need for improved transparency on fair value measurement of acquired intangible assets with no active market; and
- book values of assets acquired and liabilities assumed would be useful to better understand the "step-ups" to fair value.
Please click for access to the full feedback statement on the EFRAG website.
