IFRS 3®, Business Combinations was issued in January 2008 as the second phase of a joint project with the Financial Accounting Standards Board (FASB), the US standards setter, and is designed to improve financial reporting and international convergence in this area. However both approaches resulted in consistent conclusions. Appendix B of this document provides illustrative examples of applying the disclosure requirements of IFRS 3 in an efficient and effective manner. Issue 137 / October 2018 IFRS Developments What you need to know • The IASB issued narrow-scope amendments to IFRS 3 to help entities determine whether an acquired set of activities and assets is a business or not. These examples are based on illustrative examples from the IFRS for SMEs. The HKICPA supported the reasons for revising IFRS We hope this handbook will help you apply the complex accounting and valuation requirements of this standard to share-based IFRS 3 … Typical examples of assets that are recognised on business combination, but were not recognised before by the target, are internally generated intangible assets such as brands, patents or customer relationships. IFRS 3 amendments – Clarifying what is a business 26 October 2018 Amendments provide more guidance on the definition of a business, but complexities remain Highlights − Optional concentration test to get to asset acquisition Moreover, IFRS 3 does not specify how a reverse acquisition should be accounted for when the accounting acquiree is not a business.  -  Example: Goodwill and non-controlling interest under IFRS 3 Mommy Corp. acquires 80% share in Baby Ltd. for the cash payment of CU 100 000. IFRS 3 (2008) and FAS 141R provide guidance on the accounting for business combinations. illustrative examples and journal entries to elaborate or clarify the practical application of IFRS 2. acquirer (see IFRS 3:6, 3:7 and IFRS 3:B14 to B18) is relevant in a reverse acquisition transaction. IE1 This example illustrates the accounting for a reverse acquisition in which Entity B, the legal subsidiary, acquires Entity A, the entity issuing equity instruments and therefore the legal parent, in a reverse acquisition on 30 September 20X6. MFRS 138 IE i Illustrative Examples on MFRS 138 Intangible Assets These Illustrative Examples accompany, but are not part of, MFRS 138. IFRS 3 gives also additional guidance for applying the acquisition method to particular types of business combinations, such as achieved in stages or achieved without the transfer of consideration. hyphenated at the specified hyphenation points. IFRS 3 Business Combinations outlines the accounting when an acquirer obtains control of a business (e.g. AASB 3-compiled 4 CONTENTS Appendices: A. As a result, the staff recommended that management would look at IFRS 3 because the transaction has many features of a reverse acquisition and IFRS 2 to identify the substance of the fact patterns analysed (based on paragraph 5 of IFRS 2). IFRS 3 Business combinations prescribes accounting and disclosure requirements for the acquiring entity in a business combination scenario. As a proportion of the fair value of net assets of the acquiree on the acquisition date IFRS 3 Para 19] Example. Footnote X: Acquisitions The IASB’s Illustrative Examples on implementing IAS 38 are reproduced below for reference. Inline XBRL; ZIP; Example 9: Reconciliation of changes in property, plant and equipment. These examples are based on illustrative examples from the IFRS for SMEs. The Committee considered two requests to provide guidance on how to account for reverse acquisition transactions in which the accounting acquiree is not a business. Defined terms Page 30 B. However, one Committee member expressed concern with issuing a rejection notice given that at least some diversity exists in practice (citing an unsolicited comment letter which has been received by the Committee in advance of this discussion). IFRS 3 also expands the disclosure requirements previously included in IAS 22. The acquirer shall recognise the acquisition-date fair value of Reverse acquisitions Paragraphs IFRS 3.B19-B27 provide guidance on a particular kind of business combination called reverse acquisitions, or reverse takeovers, or reverse IPO (initial public offering). 02 Dec 2020, 15 Sep 2020 Accounting for reverse acquisitions have always constituted an interesting topic for accountants both in theory and in practice. 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