Read Us 24x7
Contribute
No Result
View All Result
  • Home
  • Technology
  • Entertainment
  • Reviews
  • Others
    • Digital Marketing
    • Insurance
    • Social Media
    • Business
    • COVID 19
    • Lifestyle
    • Sports
    • World Wide
  • Submit Press Release
  • Tech Q&A
  • About
  • Home
  • Technology
  • Entertainment
  • Reviews
  • Others
    • Digital Marketing
    • Insurance
    • Social Media
    • Business
    • COVID 19
    • Lifestyle
    • Sports
    • World Wide
  • Submit Press Release
  • Tech Q&A
  • About
No Result
View All Result
Read Us 24x7
No Result
View All Result

IFRS 3 – Definition of a Business – Business Combinations

Sayan Dutta by Sayan Dutta
July 27, 2022
in Business
Reading Time: 4 mins read
IFRS 3
Share on FacebookShare on TwitterShare on PinterestShare on Whatsapp

A business combination is the merging of two or more separate entities into one. Nearly all business combinations result in the acquirer gaining control of one or more other businesses. Audit firms in Dubai will help you with IFRS.

Table of Contents

  • Scope of IFRS 3
  • What is the objective of IFRS 3?
    • In particular, IFRS 3 specifies how the acquirer should:
  • What is the difference between IFRS 10 and IFRS 3?
  • Purchase Method of Accounting as per IFRS 3
    • IFRS-3 Disclosure Requirements
  • Is IFRS a Business Combination
    • Input
    • Process
    • Output
  • Using IFRS 3 Acquisition Method
  • Reporting Business Combinations and Avoiding Surprises
  • So, what is Next for IFRS 3?
    • To conclude

Scope of IFRS 3

UAE entities that come together into one reporting entity are defined as a business combination under IFRS 3 and are subject to the purchase method of accounting. A business combination is defined as one that brings together two or more UAE companies under common control or involves two or more mutual entities. An entity acquiring control of non-business entities is not a business combination.

What is the objective of IFRS 3?

IFRS 3 Business Combinations aims to make the information about a business combination and its effects in financial statements more relevant, more reliable, and more comparable.

In particular, IFRS 3 specifies how the acquirer should:

  • Accounting for acquisitions, liabilities assumed, and non-controlling interests.
  • Acknowledges and measures the goodwill acquired from the business combination or bargain purchase.
  • Establishes how much information to share.

What is the difference between IFRS 10 and IFRS 3?

IFRS 10 and IFRS 3 Business Combinations may seem like they are the same thing, but that’s not entirely true. Each addresses business combinations and financial statements. Although IFRS 10 prescribes specific consolidation procedures, IFRS 3 compares the items in the consolidated balance sheet, such as goodwill and non-controlling interests. Consolidation calls for both standards, not one or the other.

Purchase Method of Accounting as per IFRS 3

Accounting for Business Combinations should follow the purchase method of accounting, as stated in IFRS 3. Using the purchase method of accounting, the acquired identifiable assets and liabilities should be determined on the acquisition date at their fair value, a method that takes much more effort than the pooling of interests’ method, and always results in positive or negative goodwill recognition at the acquisition date.

IFRS 3 specifies that acquisition costs constitute the total of the fair values at the exchange dates of assets received, liabilities incurred, and equity instruments issued by the acquirer in exchange for control of the acquirer, plus any direct costs incurred by the acquirer.

Fair value is determined based on the market price of those equity instruments at the date of exchange if they are issued as consideration for acquisition.  Other valuation techniques that accounting services in UAE employ when the market price does not exist or is not considered reliable evidence of fair value.

IFRS-3 Disclosure Requirements

It is required that the acquirer disclose information that enables users to assess the nature of and financial impact of a business combination that occurs during the current reporting period and after the date of the financial statements but before they are published.  Also, any adjustments recorded in the current reporting period that relate to the business combinations that have occurred in the previous reporting period must be disclosed. 

Is IFRS a Business Combination

Investors who acquire investments must evaluate whether this event or transaction is a business combination or not. Under IFRS 3, acquired assets and liabilities must constitute a business, otherwise, it is not a business combination. Further, the investor must account for the transaction based on other IFRS.

A business comprises the following:

Input

An asset or resource that creates or can produce outputs when a process is applied to it, such as non-current assets.

Process

An input that creates outputs when a standard, protocol, convention, or rule is applied, e.g. management processes.

Output

Investors or other owners gain financial returns from the inputs and processes applied to those inputs.

Using IFRS 3 Acquisition Method

When the investor acquires a subsidiary, it must use the acquisition method to account for all business combinations.

How do consolidation and acquisition procedures differ from each other?  You need to perform acquisitions as part of all consolidation procedures.

So, you must apply the acquisition method correctly to your consolidated financial statements, and then eliminate mutual intragroup transactions afterward.

The acquisition method involves the following:

  • Recognize the acquirer.
  • Evaluating the acquisition date.
  • Identifying and evaluating gain or goodwill from a bargain purchase.
  • Identifying and assessing identifiable assets acquired liabilities, and non-controlling interest.

Reporting Business Combinations and Avoiding Surprises

Reporting business combination is a major move. A significant amount of effort and time is required to gather, assemble, and evaluate all the data needed for reporting in the financial statements under IFRS 3. There are different ways through which financial statements can be planned and executed.

So, what is Next for IFRS 3?

Currently, IASB is carrying out a study on business combinations under common control. IASB agrees that some requirements are absent, which has led to a lot of diversity in practice.

To conclude

We hope the information in this guide has shed some light on IFRS. If you wish to talk more about any issues discussed here, kindly contact accounting and financial services, Audit firms in Dubai.

ShareTweetPinSend
Sayan Dutta

Sayan Dutta

I am glad you came over here. So, you want to know a little bit about me. I am a passionate digital marketer, blogger, and engineer. I have knowledge & experience in search engine optimization, digital analytics, google algorithms, and many other things.

Related Posts

Get Clients As A Law Firm
Business

How To Get Clients As A Law Firm?

January 23, 2023
myindigocard
Business

Myindigocard – Indigo Credit Card Login, Activation 2023

January 12, 2023
Best Urgent Loan For Bad Credit
Business

7 Best Urgent Loan For Bad Credit (2023)

January 10, 2023
Business Plan
Business

How To Write A Massage Business Plan – 2023 Complete Guide

January 8, 2023
Exness Signup
Business

Exness Signup- An Ultimate Step-by-step Guide 2023

January 7, 2023
Mutual Funds for SIP to Invest
Business

Top 10 Mutual Funds for SIP to Invest in 2023

January 4, 2023
Next Post
Facetime Tap To Join Green

What Does Facetime Tap To Join Green Mean on iMessage?

Recommended

500 Mbps

Is 500 Mbps Internet Speed Really That Fast?

February 2, 2023
Sons of The Forest

Sons of The Forest Release Date – Here’s What New in February 2023

February 1, 2023
att email login

AT&T Email Login | Easy Steps to Sign in to att.net [2023]

January 31, 2023
TP-Link Router Setup

6-Step Ultimate TP-Link Router Setup Guide

January 31, 2023
Employee Engagement

Top Key Metrics To Measure Employee Engagement And Performance In 2023!

January 31, 2023
p2p

15 Best Peer-to-Peer (P2P) File Sharing Programs for Lightning-Fast Transfers

January 31, 2023

About Us

Read Us 24×7 comes with the Latest News around the Globe. From Business to Entertainment, from Sports to Technologies you will find everything right over here.

Mail ID – [email protected]

google-play-badge

Is 500 Mbps Internet Speed Really That Fast?

Sons of The Forest Release Date – Here’s What New in February 2023

AT&T Email Login | Easy Steps to Sign in to att.net [2023]

6-Step Ultimate TP-Link Router Setup Guide

Top Key Metrics To Measure Employee Engagement And Performance In 2023!

15 Best Peer-to-Peer (P2P) File Sharing Programs for Lightning-Fast Transfers

google news

Protected by Copyscape DMCA.com Protection Status

  • Terms of Service
  • Privacy Policy
  • Contact Us
  • About
  • Sitemap
  • Write For Us
  • Submit Press Release

Copyright © 2022 Read Us 24x7

No Result
View All Result
  • Home
  • Technology
  • Entertainment
  • Reviews
  • Others
    • Digital Marketing
    • Insurance
    • Social Media
    • Business
    • COVID 19
    • Lifestyle
    • Sports
    • World Wide
  • Submit Press Release
  • Tech Q&A
  • About

Copyright © 2022 Read Us 24x7