Definition of a Business (Amend IFRS 3)

Current Status Next Steps

IASB and AcSB are deliberating comments received on their Exposure Drafts.

First half of 2018 – IASB to issue final amendments.

BACKGROUND

The Accounting Standards Board (AcSB) is participating in the International Accounting Standards Board’s (IASB) project to amend International Financial Reporting Standard (IFRS) 3 Business Combinations and IFRS 11 Joint Arrangements.

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The objectives of this project are to:

  • resolve the difficulties that arise when an entity is determining whether it has acquired a business or a group of assets; and
  • clarify how an entity should account for previously held interest in a business, if acquiring control, or joint control, of that business.

The AcSB’s due process includes ensuring that Canadian entities’ financial reporting needs are considered by the IASB and issuing the AcSB’s own exposure draft on each IASB proposal. Subject to the responses to the AcSB’s exposure draft on whether the IASB’s proposals are appropriate for application in Canada, the AcSB expects that the amendments will be incorporated into Canadian GAAP in accordance with the AcSB’s strategy of adopting IFRSs for publicly accountable enterprises.

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PROJECT NEWS & DECISION SUMMARIES

AcSB Response – Definition of a Business and Accounting for Previously Held Interests (Proposed amendments to IFRS 3 and IFRS 11)
On October 31, 2016, the AcSB submitted a comment letter responding to the IASB’s Exposure Draft issued in June 2016. Overall, the letter agrees with the narrow-scope amendments to IFRS 3 Business Combinations and IFRS 11 Joint Arrangements. The letter commends both the IASB and the FASB for taking action to support the interpretation of the standards on business combinations (i.e., IFRS 3 and Proposed Accounting Standards Update No.2015-330 Business Combinations (Topic 805)) that will result in a more consistent application globally. The letter encourages both Boards to seek high-quality solutions that will result in more comparable financial reporting outcomes in the U.S. and globally. Accordingly, the letter provides some recommendations to help achieve this goal. Although the letter agrees with the proposed amendments to IFRS 11, it also expresses concern over addressing the remeasurement of previously held interests for changing ownership interests on a transaction-by-transaction basis, rather than holistically. Read the AcSB letter posted by the IASB.

AcSB Decision Summary – October 13, 2016 
The AcSB discussed and approved its response letter to the IASB’s Exposure Draft, “Definition of a Business and Accounting for Previously Held Interests (Proposed amendments to IFRS 3 and IFRS 11),” subject to drafting changes.

AcSB Decision Summary – September 21-22, 2016
The AcSB discussed the points to be included in its response letter to the IASB’s Exposure Draft, “Definition of a Business and Accounting for Previously Held Interests (Proposed amendments to IFRS 3 and IFRS 11),” after considering input received from the AcSB’s IFRS Discussion Group. The AcSB decided to encourage the IASB to amend the definition of a business in a manner that results in high-quality and common global reporting between IFRSs and U.S. GAAP.  In addition, AcSB members advised the AcSB Chair on points to raise at the September 2016 meeting of the Accounting Standards Advisory Forum on the IASB’s proposals to amend the guidance on business combinations (see the Forum’s Agenda Papers 5 and 5B). 

The AcSB encourages stakeholders to share their views on the Exposure Drafts issued by the IASB and AcSB by submitting comment letters by October 31, 2016.

AcSB Exposure Draft – Definition of a Business and Accounting for Previously Held Interests (Proposed amendments IFRS 3 and IFRS 11)
August 8, 2016. The AcSB has issued an Exposure Draft that corresponds to the IASB’s Exposure Draft on this topic. Stakeholders are encouraged to submit their comments by October 31, 2016.

IASB Exposure Draft – Definition of a Business and Accounting for Previously Held Interests (Proposed amendments to IFRS 3 and IFRS 11)
July 5, 2016. The IASB has issued an Exposure Draft proposing amendments to IFRS 3 Business Combinations and IFRS 11 Joint Arrangements. Canadian stakeholders are encouraged to submit their comments to the IASB by October 31, 2016.

 

Disclaimer: This project summary has been prepared for information purposes only. Decisions reported are tentative and reflect only the current status of discussions on this project, which may change after further Board deliberations. Decisions to publish Handbook material are final only after a formal ballot process.