IPSAS 40 classifies public sector combinations as either amalgamations or acquisitions taking into account control and other factors. The idea that gaining of control over an operation creates a rebuttable presumption that the combination is an acquisition, which was included in the January 2016 exposure draft, has been dropped in favour of a two step classification approach that first looks into whether one party to the public sector combination gains control of operations and then assesses whether the economic substance of the public sector combination is that of an amalgamation.

For recognition and measurement of amalgamations, IPSAS 40 requires use of the “modified pooling of interests” method of accounting. This method recognises the amalgamation on the date it takes place. For acquisitions, IPSAS 40 requires use of the “acquisition” method of accounting, applying the same approach as in IFRS 3 Business Combinations. This is supplemented with guidance for public sector-specific situations.

IPSAS 40 applies from 1 January 2019 with earlier adoption encouraged.

Please click to access the following additional information on the IPSASB website:

• Press release
• Access to IPSAS 40 and At-a-Glance summary
• Introductory webinar