PFRS #3 Business Combinations

• business combination occurs when one company acquires another or when two or more companies merge into one. after the combination, one company gains control over the other.
• the company that obtains control over the other is referred to as the parent or acquirer. and the company that is controlled is the subsidiary or acquiree
• the business combination is a transaction or other event in which an acquirer obtains control of one or more businesses. transactions referred to as true mergers or mergers of equals are also business combinations.
• pfrs 3 is about business combinations
• essential elements in the definition of a business combination:

  1. control
  2. business
• control

  • more than 50% or 51% or more interest in the acquiaree voting rights
• business is an integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing goods or services to customers, generating investment income or generating other income from ordinary activities
• three elements of a business

  1. input
  2. process
  3. output
• business combinations are accounted for using the acquisition method
• acquisition method:

  1. identifying the acquirer
  2. determining the acquisition date
  3. recognizing and measuring goodwill
• acquisition date is the date on which the acquirer obtains control of the acquiree this is normally the closing date
• consideration transferred in business combination is measured at fair value
• non-controlling interest or nci

  is the equity in a subsidiary not attributable, directly or indirectly, to a parent it is also called as minority interest