Additional guidance for applying the acquisition method to particular types of business combinations (Paragraph 41 to 44 of bear standard)

IFRS 3

A business combination achieved in stages

Sometimes an acquirer gains control of an acquiree in which he had an equity interest immediately before the acquisition date.

For example, on December 31, 20X1, Entity A holds a 35 percent non-controlling interest in Entity B. On that date, Entity A purchases an additional 40 percent interest in Entity B, which gives you control of Entity B. This IFRS refers to such a transaction as a business combination accomplished in stages, sometimes also called a step acquisition.

 

In a business combination achieved in stages, the acquirer will measure its previously held shareholding in the acquiree at its fair value on the acquisition date and will recognize the resulting profit or loss, if any, in results or other comprehensive income, as appropriate. In prior reporting periods, the acquirer may have recognized changes in the value of its equity interest in the acquiree in other comprehensive income. If so, the amount that was recognized in other comprehensive income will be recognized on the same basis that would be required if the acquirer had directly disposed of the previously held shareholding.

 

When a party to a joint arrangement (as defined in IFRS 11 Joint Arrangements) gains control of a business that is a joint operation (as defined in IFRS 11), and had rights to the assets and obligations for the liabilities Related to that joint operation immediately prior to the acquisition date, the transaction is a business combination accomplished in stages. Therefore, the acquirer will apply the requirements for a business combination achieved in stages, including measuring its interest in the joint operation in the manner described in paragraph 42. In doing so, the acquirer will measure its entire interest in the transaction again. joint operation.

 

A business combination achieved without the transfer of consideration

An acquirer sometimes gains control of an acquiree without transferring consideration. The accounting acquisition method for a business combination is applied to those combinations. Such circumstances include:

(a) The acquiree repurchases a sufficient number of its own shares for an existing investor (the acquirer) to gain control.

(b) The expiration of minority veto rights that previously prevented the acquirer from controlling an acquiree in which the acquirer had majority voting rights.

(c) The acquirer and the acquiree agree to combine their businesses only by contract. The acquirer does not transfer any consideration in exchange for the control of an acquiree and has no equity interest in the acquiree, either on the date of acquisition or previously. Examples of business combinations achieved by contract only include joining two businesses in a staple agreement or forming a double-listed corporation.

In a business combination achieved only by contract, the acquirer shall attribute to the acquirer's owners the amount of the acquiree's net assets recognized in accordance with this IFRS. In other words, the equity interests of the acquiree held by parties other than the acquirer are non-controlling interests in the financial statements subsequent to the acquirer's combination, even if the result is that all equity interests of the acquiree are attributed to -controlling interest.