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IFRS 3 summary and timeline

A summary of IFRS 3 Business Combinations, including information on current proposals and a timeline of past amendments, announcements, exposure drafts and consultations.

Summary

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  • Business combinations are accounted for using the acquisition method
  • Goodwill is measured as the excess of the aggregate of:
    • consideration transferred,
    • the non-controlling (minority) interest, and
    • fair value of any previously held equity interest in acquiree,

over the identifiable net assets of the acquiree.

The non-controlling (minority) interest is measured at acquisition either at fair value or as a proportion of the fair value of the net assets of the acquiree.

Current proposals

  1. As a result of the post-implementation review of IFRS 3 the IASB has initiated a project to consider whether amendments should be made to IFRS 3 and IAS 36 to:
    • improve disclosures about acquired businesses, and
    • simplify accounting for goodwill
    • improve aspects of the impairment test for goodwill.

    A discussion paper was published in March 2020 and feedback is expected to be published in March 2021.

  2. IFRS 3 does not provide guidance on the applicable accounting treatment where entities in a business combination are controlled by the same party. A project is underway to explore how companies should account for such transactions.

    A discussion paper was issued in November 2020 and feedback is expected to be published in the second half of 2021.

Timeline

 
Date Update
19 May 2020 IASB issues Reference to the Conceptual Framework - amendments to IFRS 3
Effective for annual periods beginning on or after 1 January 2022.
19 March 2020 IASB issues discussion paper on Business Combinations – Disclosures, Goodwill and Impairment
30 May 2019
IASB proposes amendments to IFRS 3 in ED/2019/3 Reference to the Conceptual Framework – proposed amendments to IFRS 3
22 October 2018 IASB issues Definition of Business amendments to IFRS 3
Effective for business combinations for which the acquisition date is on or after the beginning of the first annual period beginning on or after 1 January 2020 and to asset acquisitions that begin on or after the beginning of that period. Narrow scope amendments help companies determine whether an acquisition made is of a business or a group of assets.
12 December 2017 IASB issues Annual Improvements to IFRS Standards 2015 – 2017
Effective for annual periods beginning on or after 1 January 2019.
12 December 2013 IASB issues Annual Improvements to IFRSs 2010–2012 and 2011–2013 Cycles, both of which amend IFRS 3
Annual Improvements to IFRSs 2010-2012 amendment effective for business combinations on or after 1 July 2014; Annual Improvements to IFRSs 2011-2013 amendment effective for annual periods beginning on or after 1 July 2014.
6 May 2010 IASB issues Annual Improvements to IFRSs 2010 (Amendments to IFRS 3)
Effective for annual periods beginning on or after 1 July 2010.
10 January 2008 IASB issues IFRS 3 (2008), a revised version of the standard
Effective for business combinations on or after the beginning of the first annual period beginning on or after 1 July 2009.
31 March 2004 IASB issues IFRS 3
Effective for business combinations on or after 31 March 2004.