The International Accounting Standards Board (IASB) has published Discussion Paper DP/2020/2 Business Combinations under Common Control to explore possible new accounting requirements for mergers and acquisitions involving companies within the same group—business combinations under common control (in short, BCUCC).
IFRS 3 Business Combinations set outs reporting requirements for mergers and acquisitions—referred to as business combinations in IFRS Standards. However, that Standard does not specify how to report transactions that involve transfers of businesses between companies within the same group. In this regard, the Discussion Paper sets out IASB’s preliminary views and discusses a range of issues that would need to be addressed to set up reporting requirements for BCUCC aiming to reduce diversity in practice and provide users of the receiving company’s financial statements with better information about these combinations.
Specifically, the IASB is suggesting that the acquisition method should be used when a BCUCC affects non-controlling shareholders. That method is required by IFRS 3 for mergers and acquisitions between unrelated companies. In all other cases, the IASB is suggesting that a book-value method should be used. A single form of a book-value method would be specified in IFRS Standards.
Invitation to comment
The Discussion Paper is open for comment until 30 July 2021.
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