Business consulting services
Our business consulting services can help you improve your operational performance and productivity, adding value throughout your growth life cycle.
Business process solutions
We can help you identify, understand and manage potential risks to safeguard your business and comply with regulatory requirements.
Business risk services
The relationship between a company and its auditor has changed. Organisations must understand and manage risk and seek an appropriate balance between risk and opportunities.
As organisations become increasingly dependent on digital technology, the opportunities for cyber criminals continue to grow.
Forensic and investigation services
At Grant Thornton, we have a wealth of knowledge in forensic services and can support you with issues such as dispute resolution, fraud and insurance claims.
Mergers and acquisitions
Globalisation and company growth ambitions are driving an increase in M&A activity worldwide. We work with entrepreneurial businesses in the mid-market to help them assess the true commercial potential of their planned acquisition and understand how the purchase might serve their longer- term strategic goals.
Recovery and reorganisation
Workable solutions to maximise your value and deliver sustainable recovery
Transactional advisory services
We can support you throughout the transaction process – helping achieve the best possible outcome at the point of the transaction and in the longer term.
We provide a wide range of services to recovery and reorganisation professionals, companies and their stakeholders.
The International Financial Reporting Standards (IFRS) are a set of global accounting standards developed by the International Accounting Standards Board (IASB) for the preparation of public company financial statements. At Grant Thornton, our IFRS advisers can help you navigate the complexity of financial reporting from IFRS 1 to IFRS 17 and IAS 1 to IAS 41.
Audit quality monitoring
Having a robust process of quality control is one of the most effective ways to guarantee we deliver high-quality services to our clients.
Global audit technology
We apply our global audit methodology through an integrated set of software tools known as the Voyager suite.
Corporate and business tax
Our trusted teams can prepare corporate tax files and ruling requests, support you with deferrals, accounting procedures and legitimate tax benefits.
Direct international tax
Our teams have in-depth knowledge of the relationship between domestic and international tax laws.
Global mobility services
Through our global organisation of member firms, we support both companies and individuals, providing insightful solutions to minimise the tax burden for both parties.
Indirect international tax
Using our finely tuned local knowledge, teams from our global organisation of member firms help you understand and comply with often complex and time-consuming regulations.
Innovation and investment incentives
Dynamic businesses must continually innovate to maintain competitiveness, evolve and grow. Valuable tax reliefs are available to support innovative activities, irrespective of your tax profile.
Private client services
Our solutions include dealing with emigration and tax mitigation on the income and capital growth of overseas assets.
The laws surrounding transfer pricing are becoming ever more complex, as tax affairs of multinational companies are facing scrutiny from media, regulators and the public
Tax policies are constantly evolving and there are a number of complex changes on the horizon that could significantly affect your business.
Outsourcing Changes to the Outsourcing legislation, specifically when offshoringSignificant changes to the dynamic of the financial services sector in recent years have shifted the paradigms in how we work. The increased digitisation of the workforce, changes in business models, globalisation, and remote working capabilities have led to a new approach to the delivery of services.
Asset management Inflation and tax planningThe recent onset of rapid inflation is an unwelcome development that is having a widespread impact on US businesses and tax planning.
This article discusses how to identify the date of acquisition or the date the business combination is affected.
Our ‘Insights into IFRS 3’ summarises key areas of the Standard, highlighting aspects that are more difficult to interpret and revisits the most relevant features impacting your business.
This article should be read closely with our other ‘identification’ articles:
How does IFRS 3 define the acquisition date?
IFRS 3 defines the acquisition date as the date the acquirer obtains control of the acquiree. In a combination effected by a sale and purchase agreement, this is generally the specified closing or completion date (the date when the consideration is transferred and acquiree shares or underlying net assets are acquired).
The acquisition date is critical because it determines when the acquirer recognises and measures the consideration transferred, the assets acquired, and liabilities assumed. The acquiree’s results are consolidated from this date. The acquisition date materially impacts the overall acquisition accounting, including post-combination earnings.
The acquisition date is often readily apparent from the structure of the business combination and the terms of the sale and purchase agreement (if applicable) but this is not always the case. Complications can arise because of the many ways, both contractual and non-contractual, that business combinations can be put together.
For convenience an entity might wish to designate an acquisition date of the end (or the beginning) of a month, the date on which it closes its books, rather than the actual acquisition date (ie a date during the month). Unless events between the ‘convenience’ date and the actual acquisition date result in material changes in the amounts recognised, that entity’s practice would comply with the requirements of the Standard as noted in the Basis for Conclusions to IFRS 3.
The period between the start of negotiations and final settlement of all aspects of a combination can be protracted. Applicable corporate laws, shareholder approval requirements, competition rules and stock market regulations also vary and may affect the analysis and the date at which control is transferred to the acquirer.
Because no two business combination transactions are identical, there are few (if any) ‘rules of thumb’ to assist in identifying the acquisition date. Instead, the definition of control should be applied to the specific facts and circumstances of each situation. Judgement will often be required, and disclosure of the assessment made will need to be fully disclosed under the requirements of IAS 1 ‘Presentation of Financial Statements’.
Insights into IFRS 3
Example situations when determining the acquisition date
1. The purchase agreement specifies that control is transferred on an effective date different from the closing date
Consider whether the provisional effective date actually changes the acquisition date. In practice, many of these types of provisions are simply mechanisms to adjust the price but may not affect the date when control is obtained.
An agreement that artificially backdates the date of acquisition cannot justify the acquisition date (from an accounting perspective) being the earlier date. In other words, it cannot be subsequently decided that control took place at a date when the acquirer and the acquiree were unlikely having any relationship. Control cannot be decided afterwards on the basis of a contractual term that artificially places the acquisition date before the terms of the contract provided the acquirer with the benefits associated of returns from that date.
2. The purchase is complete subject to shareholder approval
Consider the date when the acquirer can effect change in the board of directors of the acquiree.
Until the approval is obtained it would be difficult to consider that control has been transferred.
3. The purchase is complete subject to regulatory approval
Consider whether the date of regulatory approval is merely a formality.
For example, a target company operates in a market and jurisdiction where the acquirer is already a significant competitor. Where this transaction requires the approval of the competition authority in that jurisdiction, it would be difficult to conclude this regulatory approval is just a formality. Therefore, until the approval is obtained, control cannot have been transferred to the acquirer.
4. No closing date specified
Consider, for example, when an investee repurchases own shares held by other investors resulting in an existing shareholder becoming a majority shareholder. In this case, the starting point is to identify the date when the shareholder's proportionate voting rights amounted to a controlling interest.
5. Made by public offer
Consider the date a public offer becomes unconditional (with a controlling interest acquired).
6. The purchase is complete subject to other conditions
Consider the date when the acquirer starts directing the acquiree's operating and financing policies.
How we can help
We hope you find the information in this article helpful in giving you some insight into IFRS 3. If you would like to discuss any of the points raised, please speak to your usual Grant Thornton contact or your local member firm.
Stay ahead of financial reporting standards
Now more than ever the need for businesses, their auditors and any other accounting advisors to work closely together is essential. Subscribe below and we will share our latest insights into International Financial Reporting Standards with you.