IFRS 3: Business Combinations

1. Introduction and Objective

International Financial Reporting Standards (IFRS) are technical accounting standards adopted by the IASB that represent the globally accepted manual. The NIIF 3 describes accounting when an acquirer obtains control of a business through the acquisition method, measuring assets and liabilities at their fair values.

Main objective: Improve the relevance, reliability and comparability of information about business combinations by establishing principles for the acquirer:

• Recognize and measure identifiable assets, assumed liabilities and non-controlling interests.
• Recognize and measure the capital gain or profit from advantageous purchase.
• Determine the information to disclose to assess the financial effects of the combination.

2. Scope and Exceptions

• When does it apply? It applies to any transaction or event that meets the definition of a business combination.
• When does it NOT apply? It does not apply in the formation of joint agreements (in the financial statements of the agreement itself), acquisition of assets that do not constitute a business (without generating goodwill), combinations under common control, nor in the acquisition of investments in subsidiaries by investment entities (NIIF 10) that are measured at fair value with changes in profit or loss.