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Accounting for business combination vs. asset acquisition


What is the difference in accounting for business combination and asset acquisition under IFRS 3 - Business Combinations?

asked Jan 26, 2013 in IFRS 3 - Business Combinations by anonymous
retagged Feb 16, 2013 by Mysio

1 Answer

0 votes
A transaction or other event in which an acquirer obtains control of one or more businesses. Transactions sometimes referred to as true mergers or mergers of equals are also business combinations. Business combinations can occur in various ways, such as by transferring cash, incurring liabilities, issuing equity instruments (or any combination thereof), or by not issuing consideration at all. Business combinations can be structured in various ways to satisfy legal, taxation or other objectives, including one entity becoming a subsidiary of another, the transfer of net assets from one entity to another or to a new entity. The business combination must involve the acquisition of a business, which generally has three elements;
Inputs: An economic resource (e.g. non-current assets, intellectual property) that creates outputs when one or more processes are applied to it Process a system, standard, protocol, convention or rule that when applied to an input or inputs, creates outputs (e.g. strategic management, operational processes, resource management) Output the result of inputs and processes applied to those inputs.
An asset acquisition strategy is the purchase of a company by buying its assets instead of its stock. An asset acquisition strategy may be used for a takeover or buyout if the target is bankrupt.
answered Nov 8 by Finance Professional Level 2 Member (3,680 points)


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