The International Accounting Standards Board has published proposed narrow-scope amendments to IFRS 3 Business Combinations.
The changes would update a reference to the Conceptual Framework for Financial reporting without changing the accounting requirements for business combinations.
IFRS 3 specifies ‘how’ a company should account for the assets and liabilities it acquires when it obtains control of a business. It refers companies to the Board’s Conceptual Framework to determine ‘what’ constitutes an asset ort a liability.
IFRS 3 refers to an old version of the Conceptual Framework. The Board proposes to update IFRS 3 so it refers instead to the latest version, issued in March 2018.
Updating the reference with making any other changes to IFRS 3 could change the accounting requirements for business combinations because the liability definition in the 2018 Conceptual Framework is broader than that in previous versions. Companies would need to record provision and contingent liabilities when they acquire a business they would not record in other circumstances. To avoid this, the Board also proposes that for provisions and contingent liabilities, companies refer to IAS 37 Provisions, Contingent Liabilities & Contingent Assets instead to determine what constitutes a liability.
Comment deadline for all this is 27 September.