IASB completes the second phase of the business combinations project

10 January 2008

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Access the Business Combinations project pages.

Download the Project Summary and Feedback Statement [368 KB].

The International Accounting Standards Board (IASB) has completed the second phase of its business combinations project by issuing today a revised version of IFRS 3 Business Combinations and an amended version of IAS 27 Consolidated and Separate Financial Statements.  The new requirements take effect on 1 July 2009, although entities are permitted to adopt them earlier.

The project was undertaken jointly with the US Financial Accounting Standards Board (FASB). The objective was to develop a single high quality accounting standard that would ensure that the accounting for business combinations is the same whether an entity is applying International Financial Reporting Standards (IFRSs) or US generally accepted accounting principles (GAAP).

Business combinations are an important feature of the capital markets. Over the past decade the average annual value of corporate acquisitions worldwide has been the equivalent of 8‑10 per cent of the total market capitalisation of listed securities.

In publishing its equivalents to IFRS 3 and IAS 27, the FASB has made fundamental changes to its accounting for business combinations, most of which bring US accounting into line with the existing IFRS 3 and IAS 27. Other improvements will change both IFRSs and US GAAP. The revised IFRS 3 reinforces the existing IFRS 3 model but remedies problems that have emerged in its application.

Commenting on today’s announcement, Sir David Tweedie, IASB Chairman, said:

Investors and their advisers have a difficult enough job assessing how the activities of the acquirer and its acquired business will combine. But comparing financial statements is more difficult when acquirers are accounting for acquisitions in different ways, whether those differences are a consequence of differences between US GAAP and IFRSs or because IFRSs or US GAAP are not being applied on a consistent basis.

Now the accounting requirements in IFRSs and US GAAP will be substantially the same, thanks largely to the changes that the FASB has made to US GAAP. The changes to IFRSs have, in contrast, been relatively small.

The IASB is also publishing a Project Summary and Feedback Statement and an assessment of the likely effect of the new requirements. These innovations are designed to help those who sent comments to the IASB to understand how their comments affected the IASB’s thinking and to assist regulators that undertake impact assessments when IFRS requirements change. The new requirements will also be the subject of the IASB’s recently introduced post‑implementation review process.

The revised IFRS 3 and the amended IAS 27 are available for eIFRS subscribers from today. Those wishing to subscribe to eIFRSs should visit the online shop at www.iasb.org or contact:

IASC Foundation Publications Department,  30 Cannon Street, London EC4M 6XH, United Kingdom. 

Tel: +44 (0)20 7332 2730
Fax +44 (0)20 7332 2749 
Email: publications@iasb.org
Web: www.iasb.org

Printed copies of IFRS 3 and IAS 27 (ISBN for the set 978-1-905590-44-5) are available, at £18.00 plus shipping, from the IASC Foundation Publications Department.

• Mark Byatt, Director of Corporate Communications, IASB
  Telephone: +44 (0)20 7246 6472
  Email: mbyatt@iasb.org  
• Sonja Horn, Communications Adviser, IASB
  Telephone: +44 (0)20 7246 6463
  Email: shorn@iasb.org

• Wayne Upton, Director of Research, IASB
  Telephone: +44 (0)20 7246 6449
  Email: wupton@iasb.org 
• Alan Teixeira, Senior Project Manager, IASB 
  Telephone: +44 (0)20 7246 6442
  Email: ateixeira@iasb.org