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ED/2016/1 Definition of a Business and Accounting for Previously Held Interests (Proposed amendments to IFRS 3 and IFRS 11)

The Exposure Draft (ED) proposes to clarify:

(a) the definition of a business; and

(b) the accounting for previously held interests when an entity obtains control of a business that is a joint operation and when it obtains joint control of a business that is a joint operation.

Definition of a business

In 2014 and 2015, the IASB carried out a Post-implementation Review (PIR) of IFRS 3 Business Combinations. That review identified that stakeholders find it difficult to apply the definition of a business in IFRS 3.

Defining a business is important. This is because the financial reporting requirements for the acquisition of a business are different from the requirements for the purchase of a group of assets that does not constitute a business. The proposed amendments are intended to provide entities with clearer application guidance to help distinguish between a business and a group of assets when applying IFRS 3.

Accounting for previously held interests

The IASB was informed that there is diversity in practice in accounting for previously held interests in the assets and liabilities of a joint operation in two types of transactions: those in which an entity obtains control of a business that is a joint operation and those in which it obtains joint control of a business that is a joint operation. The proposed amendments to IFRS 3 and IFRS 11 Joint Arrangements are intended to clarify the accounting for each of these types of transactions.

To download the Exposure Draft, click here.

Invitation to comment

The ED is open for comment until 30 September 2016.

You may provide your comments online or email us at technical@masb.org.my  

Click here to Comment Online.