Acquisitions of businesses can take many forms and can have a fundamental impact of the acquirer’s operations, resources and strategies. These acquisitions are described in many ways depending on the underlying facts and circumstances: mergers, takeovers and business combinations are all terms that are used, and the accounting and disclosure requirements for all of them are set out in IFRS 3 ‘Business Combinations’.
This article follows on from our published articles on ‘Insights into IFRS 3 – Identifying the acquirer’ and ‘Insights into IFRS 3 – Reverse acquisitions explained’ and presents guidance for an area which is challenging in practice – reverse acquisitions.
This article focuses on reverse acquisitions within the scope of IFRS 3. When a reverse acquisition falls outside of the scope of IFRS 3, further details on how to account for it can be found in our IFRS Viewpoint – ‘Reverse acquisitions outside the scope of IFRS 3’.
When is a reverse acquisition in the scope of IFRS 3?
Reverse acquisitions are within the scope of IFRS 3 provided the accounting acquiree is a business under IFRS 3. This Standard provides detailed guidance on what constitutes a business and what does not, and this guidance has been considered in our article ‘Insights into IFRS 3 – Definition of a business’.
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Measure consideration transferred and goodwill arising from a reverse acquisition; present a reverse acquisition in consolidated financial statements; and account for non‑controlling interest.
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.