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IFRS 3 Business combinations

IFRS 3 Business Combinations provides guidance on the accounting treatment on the acquisition of a business. The standard was published in January 2008 and is effective from 1 July 2009.

Full text standard

Unaccompanied version of IFRS 3
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This unaccompanied version does not include additional content that accompanies the full standard, such as illustrative examples, implementation guidance and bases for conclusions.

IFRS 3 summary and timeline

Looking for the synopsis? Our IFRS 3 summary and timeline are now on a separate page, featuring information on current proposals and a timeline of IASB updates.

Which version of the standard?

Financial Reporting Faculty members have unlimited online access to the consolidated edition of IFRS and amendments through the IASB's IFRS Standards Navigator service. Please log into IFRS Standards Navigator to access electronic versions of the standards. Or find out more about how to join the faculty.

The ICAEW Library & Information Service also holds print versions of the IFRS standards. Contact us by telephone on +44 (0)20 7920 8620, by web chat or by email at library@icaew.com

*Not UK endorsed as at 4 February 2022. Read more on UK endorsement of IFRS standards. Endorsed for use in the EU as at 4 February 2022. Read more on EU endorsement of IFRS standards

Related IFRIC interpretations

IFRIC 17 Distributions of Non-cash Assets to Owners
Addresses the accounting for dividends of non-cash assets, including those where there is a cash alternative.

IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments
Addresses the accounting by an entity which issues equity instruments in order to settle, in full or part, a financial liability.

SIC 32 Intangible Assets – Website Costs
Addresses accounting for costs associated with the development of a website.

UK reduced disclosures

UK qualifying parents and subsidiaries can take advantage of FRS 101 Reduced Disclosure Framework. Our FRS 101 page gives more information on which entities qualify and the criteria to be met.

Amendments to the standard

Where an entity applies FRS 101, it is preparing Companies Act accounts rather than IAS accounts. Therefore the following amendments must be made to IFRS 3 in order to achieve compliance with the Companies Act and related Regulations:

  1. In the case of a bargain purchase, the excess is recognised on the face of the statement of financial position. Subsequently the excess is measured in profit or loss over a specified period.
  2. Where the cost of a business combination may be adjusted due to consideration which is contingent on future events, the estimated amount of the adjustment is included in the cost of the business combination at the acquisition date if the adjustment is probable and can be measured reliably. If the potential adjustment is not recognised at the acquisition date but later becomes probable and can be measured reliably, the additional consideration is treated as an adjustment to the cost of the business combination. From 1 January 2016 this guidance on contingent consideration is amended to require that contingent consideration balances arising from acquisitions before SI 2015/980 is applied (usually 1 January 2016) are not adjusted as a result of changes in company law and the company's previous accounting policy continues to apply. Contingent consideration balances arising from acquisitions after SI 2015/980 is applied are accounted for in accordance with IFRS 3, without amendment to the standard.

Disclosure exemptions

FRS 101 paragraph 8(b) states that a qualifying entity is exempt from most of the IFRS 3 disclosure requirements in respect of business combinations during the period or after the end of the period provided that equivalent disclosures are made in the consolidated financial statements of the group in which the entity is consolidated. The following basic disclosures are still required:

  • The name and a description of the acquiree;
  • The acquisition date and percentage of voting equity interests acquired;
  • The acquisition date fair value of consideration transferred, in total and by class;
  • Amounts recognised at acquisition for each major class of assets and liabilities;
  • The gain recognised in a bargain purchase;
  • The non-controlling interest recognised at acquisition and measurement basis applied;
  • The revenue and profit or loss of the combined entity for the current period as though the acquisition date for any mid-period business combination was the start of the period.

IFRS 3 paragraphs for which exemption is available: 62, B64(d), B64(e), B64(g), B64(h), B64(j)-(m), B64(n)(ii), B64(o)(ii), B64(p), B64(q)(ii), B66, B67.

ICAEW guidance and commentary


IFRS 3 Revised
Financial Reporting Faculty, 23 July 2015
This exclusive factsheet for Financial Reporting Faculty members sets out the key changes made by the revisions to IFRS 3. 

Annual factsheets

These exclusive factsheets, produced annually by the Financial Reporting Faculty for its members, highlight all new and modified requirements for preparers of IFRS accounts. Each annual edition focuses primarily on new requirements with mandatory application for preparers with periods beginning on or after 1 January of that year.

2022 IFRS Accounts
Financial Reporting Faculty, 8 August 2022

2021 IFRS accounts
Financial Reporting Faculty, 10 August 2021

2020 IFRS accounts
Financial Reporting Faculty, updated August 2021

2019 IFRS accounts
Financial Reporting Faculty, updated October 2020 


Access to eBooks is only available to ICAEW members and ACA students – please log in to view these titles.

Business combinations
EY, International GAAP 2021 (2020)
The latest edition of this comprehensive guide offers a global perspective on complex technical accounting issues to help practitioners interpret and implement IFRS. It contains worked examples and illustrations from published financial reports of major listed companies from around the world. This chapter discusses IFRS 3, alongside a separate chapter on Business combinations under common control.

If you have any difficulties using these eBooks, please see our Help and support advice or contact library@icaew.com.

Example accounts

IFRS model accounts and disclosure checklists
Online disclosure checklists, general IFRS illustrative statements and compliance questionnaires collected by the ICAEW Library.

Company Reporting (Croner-i)

The ICAEW Library can provide examples of real-life company reports to help keep you up-to-date with reporting practices and benchmark your financial reporting compliance. Company Reporting analyses current IFRS disclosures from public companies, organised by industry sector. It also provides detailed monthly Common Practice reports on specific issues.

Contact us on +44 (0)20 7920 8620, by web chat, or at library@icaew.com to get any documents from Company Reporting.

External resources

Some guides and comparisons that we link to may pre-date the latest amendments to this standard. While these resources contain useful information, please treat them with appropriate caution.

International GAAP 2022: Generally Accepted Accounting Practice under IFRS
EY International Financial Reporting Group, 2022
Detailed guide on interpreting and implementing IFRS, with illustrative examples and extracts from financial statements. The manual is available online (free registration required) as part of EY Atlas Client Edition. Chapters and sections are searchable and downloadable in PDF format. The whole book is also downloadable in ePub format for offline access.

IFRS Practice Issues: Replacement of a share-based payment in a business combination
KPMG newsletter looking at accounting for share-based payment replacement awards and unreplaced awards, published May 2010.

Business combinations and changes in ownership interests : a guide to the revised IFRS 3 and IAS 27
Deloitte 164-page guide dealing mainly with accounting for business combinations under IFRS 3, published July 2008. The appendices (a) compare the 2008 versions of IFRS 3 and IAS 27 (2008) with their predecessors, and (b) identify the continuing differences between IFRSs and US GAAP.

Further reading

Manuals and handbooks

The ICAEW Library stocks the latest IFRS handbooks and manuals. You can browse all our books on IFRS 3 and mergers and acquisitions accounting or request any of the following popular titles by contacting us on +44 (0)20 7920 8620, by web chat, or at library@icaew.com

Insights into IFRS 2020–21
KPMG, Sweet and Maxwell, 2020
Manual providing practical guidance with an emphasis on the real-life application of IFRS, with examples based on actual questions that have arisen in practice around the world.

Wiley IFRS 2020: Interpretation and application of IFRS standards
PKF, Wiley, 2020
Reference manual providing full coverage of the latest standards and thorough guidance for implementation, featuring practical tools and insight from a practitioner's perspective.

Manual of accounting: IFRS supplement 2020
PwC, LexisNexis, 2019
Practical guidance on the standards and the accounting requirements of UK law applicable to UK users of IFRS. 

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Get an opinion from the experts. Our experienced technical advisors can help you with your IFRS questions and offer practical advice. Call the advisory helpline on +44 (0)1908 248 250. 

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