In October 2018, the IASB issued ‘Definition of a Business’ making amendments to IFRS 3 ‘Business Combinations’.
The amendments are a response to feedback received from the post-implementation review of IFRS 3 (‘the Standard’). They clarify the definition of a business, with the aim of helping entities to determine whether a transaction should be accounted for as an asset acquisition or a business combination.
In summary, the amendments:
Yes. The changes narrow the definition by:
The new definition now reads:
‘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 (such as dividends or interest) or generating other income from ordinary activities.’
The below steps and considerations are described in the amended Standard to determine if the acquired set of activities and assets is a business:
Step 1 - Consider whether to apply the concentration test
Step 2 - Consider what assets have been acquired
Step 3 - Consider how the fair value of gross assets acquired is concentrated
Step 4 - Consider whether the acquired set of activities and assets has outputs
Step 5 - Consider if the acquired process is substantive
Download the full article 'Insights into IFRS - Definition of a Business' for further details into:
We hope you find this article helpful in giving you some insight into the new definition of a business. If you would like to discuss any of the points raised, please speak to your usual Grant Thornton contact or contact your local member firm.
