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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
The International Accounting Standards Board (IASB) provides free access to the consolidated unaccompanied international accounting standards for the current year through its website. Free registration is required.

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 eIFRS service. Please log into eIFRS to access electronic versions of the standards through these links.

Annual period starts Effective version of standard Notes on amendments
On or after 1 January 2021 IFRS 3 2019 Issued Standards Includes amendments 1–7
1 January 2020 – 31 December 2020 IFRS 3 Issued Standards 2017 and
Annual Improvements to IFRS 2015-2017 cycle,
Amendments to references to the Conceptual Framework,
Definition of a Business
Includes amendments 1, 2, 3, 5, 6 and 7
1 January 2019 – 31 December 2019 IFRS 3 Required Standards 2019 Includes amendments 1–3 and 5
1 January 2018 – 31 December 2018 IFRS 3 Required Standards 2018 Includes amendments 1 and 2
1 January 2016 – 31 December 2017 IFRS 3 Required Standards 2017 Does not include any amendments

The Required Standards book for a particular year assumes that there is no early application of issued but not yet effective IFRSs. The Issued Standards book assumes early application of all issued IFRSs.

For the latest version of the standard, including all amendments, use IFRS 3 2019 Issued Standards.

Recent amendments

Financial Reporting Faculty members have full access to recent amendments through the IASB's eIFRS service. Please log into eIFRS to access electronic versions of the amendments through these links.

For more detailed discussion of the amendments, check the Financial Reporting Faculty's annual IFRS factsheets.

1. IFRS 9 amendment to IFRS 3

Effective for annual periods beginning on or after 1 January 2018. Earlier application is permitted.

IFRS 9 amends IFRS 3 to:

  • Delete reference to IAS 39 classifications of financial instruments.
  • Require that in a business combination achieved in stages, any gain or loss on the re-measurement of a previously held equity interest to fair value is recognised in profit or loss or other comprehensive income as appropriate.
  • Replace references to IAS 39 with references to IFRS 9.
  • Require that contingent consideration that is not equity is measured at fair value at each reporting date and changes that are not measurement period adjustments are recognised in profit or loss.


2. IFRS 15 Revenue from Contracts with Customers amendments to IFRS 3

Effective for annual periods beginning on or after 1 January 2018. Earlier application is permitted.

As a result of the issue of IFRS 15, IFRS 3 is amended to refer to income recognised in accordance with the principles of IFRS 15 rather than amortisation recognised in accordance with IAS 18 in the context of the measurement of contingent liabilities.

3. IFRS 16 Leases amendments to IFRS 3

To be applied to annual periods beginning on or after 1 January 2019. Earlier application is permitted.

IFRS 3 is amended to:

  • Remove guidance relating to operating leases in which the acquiree is the lessee.
  • Add guidance on the recognition of right-of-use assets and lease liabilities for leases in which the acquiree is the lessee.
4. IFRS 17 Insurance Contracts amendment to IFRS 3*

To be applied to periods beginning on or after 1 January 2021. Earlier adoption is permitted.

IFRS 3 is amended to:

  • Delete the exception to the requirement to classify or designate identifiable assets and liabilities at the acquisition date in relation to insurance contracts.
  • Add an exception to the recognition and measurement principles relating to insurance contracts.

* Not EU endorsed as at 21 March 2019. Read more on EU endorsement.

5. Annual Improvements 2015-17

To be applied to annual periods starting on or after 1 January 2019. Earlier application is permitted.

An amendment to IFRS 3 clarifies that when an entity obtains control of a business that is a joint operation, and had rights to the assets and obligations for the liabilities relating to that joint operation immediately before the acquisition date, the transaction is a business combination achieved in stages.

6. Amendments to References to the Conceptual Framework in IFRS Standards – amendment to IFRS 3*

Effective for annual periods beginning on or after 1 January 2020. Earlier application is permitted, if at the same time an entity also applies the amendments to other IFRS Standards.

A footnote is added to IFRS 3 to clarify that for the purposes of applying the Standard, the definitions of asset and liability contained within the 2001 Framework for the Preparation and Presentation of Financial Statements apply rather than those in the 2018 Conceptual Framework.

* Not EU endorsed as at 21 March 2019. Read more on EU endorsement.

7. Definition of Business amendments to IFRS 3*

To be applied to annual periods beginning on or after 1 January 2020. Earlier application is permitted.

The IFRS 3 definition of a business and accompanying application guidance are amended to clarify that a business must include an input and a substantive process that together significantly contribute to the ability to create outputs. The definition focuses on outputs of goods and services provided to customers and removes reference to an ability to cut costs. Guidance and illustrative examples are also added to help reporters assess whether a substantive process has been acquired.

* Not EU endorsed as at 21 March 2019. Read more on EU Endorsement.

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.

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.

2019 IFRS accounts 🔒
Financial Reporting Faculty, 27 June 2019

2018 IFRS accounts 🔒
Financial Reporting Faculty, 6 August 2018

2017 IFRS accounts🔒 
Financial Reporting Faculty, 30 April 2018


Back from the grave 🔒
Geoff Meeks, By All Accounts, July 2016
Geoff Meeks makes the case for resurrecting the concept of amortising purchased goodwill.


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

IFRS 2018: Interpretation and application of IFRS standards 🔒
PKF (2018)
This Wiley guide has been fully updated to help practitioners apply and comply with the latest international financial reporting standards. It provides detailed guidance along with illustrative examples. The chapter on business combinations covers:

  • Business combinations and consolidations
  • Business combinations
  • Disclosure requirements
  • Examples of financial statement disclosures.

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. 

Distinguishing a business from an asset or a group of assets (pharmaceutical and life sciences industry)
In-depth guide from PwC, published in March 2015, discussing whether an acquisition, investment or license should be accounted for as a business combination or an asset acquisition. The guide includes several illustrative examples. 

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.

IFRS 3 and FASB 141
Article originally published in the Technical Matters column of Financial Management, April 2008 edition, which examines changes to the FASB's and IASB's standards on business combinations and at future convergence. 

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

International GAAP 2019
EY, Wiley, 2019
Comprehensive reference guide to interpreting and implementing IFRS, featuring detailed analysis of technical accounting issues accompanied by worked examples and illustrations taken from the actual financial statements of companies that report under IFRS.
Request this book

Manual of accounting: IFRS for the UK 2019
PwC, Tolley, 2018
Practical guidance on the standards and the accounting requirements of UK law applicable to UK users of IFRS. This manual was published in November 2018 and includes key updates from amendments, annual improvements and the revised conceptual framework issued in March 2018.
Request this book

Insights into IFRS 2018–19
KPMG, Thomson Reuters, 2018
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. This book deals with standards issued by the IASB as at 1 August 2018.
Request this book

iGAAP 2018: A guide to IFRS reporting (Volume A)
Deloitte, Croner-i, 2018
Practical and comprehensive guidance for entities currently reporting under IFRS and those considering whether to move to IFRS in the near future. This manual deals with standards issued by the IASB as at 1 September 2017.
Request this book

GAAP 2018: UK reporting - IFRSs (Volume C)
Deloitte, Croner-i, 2018
Comprehensive manual explaining how to apply IFRS, focusing on practical implementation issues with commentary and analysis of issues specific to UK companies. This volume deals with standards issued by the IASB as at 1 September 2017.
Request this book

Wiley IFRS 2018: Interpretation and application of IFRS standards
PKF, Wiley, 2018
Reference manual providing full coverage of the latest standards and thorough guidance for implementation, featuring practical tools and insight from a practitioner's perspective.
Request this book


The ICAEW Library subscribes to over 160 current journals and magazines, as well as offering access to 1,800 key UK and international business, management and trade titles online. You can browse articles on IFRS 3 and mergers and acquisitions accounting or request any of the selected articles below by contacting us on +44 (0)20 7920 8620, by web chat, or at library@icaew.com

Compliance with IFRS 3 - and IAS 36 - required disclosures across 17 European countries: company- and country-level determinants
Accounting and Business Research, 2013
The authors have analysed a large sample of European companies mandatorily applying IFRS. Focusing on disclosures required by IFRS 3, 'Business combinations', and IAS 36, 'Impairment of assets', the authors find substantial non-compliance.

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