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IFRS: Common control business combinations

How should an entity account for a business combination involving entities under common control? This is an important issue because common control combinations occur frequently but are excluded from the scope of IFRS 3 – the IASB’s standard on business combination accounting.

This IFRS Viewpoint gives you our views on how to account for common control combinations.

Our view

Most business combinations are governed by IFRS 3. However, those involving entities under common control are outside the scope of this Standard. There is no other specific guidance on this topic elsewhere in IFRS. Management therefore needs to use judgement to develop an accounting policy that provides relevant and reliable information in accordance with IAS 8.

In our view, the most suitable accounting policies are to apply:

  • a predecessor value method; or
  • the acquisition method in accordance with IFRS 3.

Whichever accounting policy is chosen, it should be applied consistently to similar transactions. The accounting policy should also be disclosed if material.