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Chapter 19

The acquisition method

5.1 Accounting for business combinations

IFRS 3 applies to business combinations. A business combination is where an
acquirer obtains control of a business.

IFRS 3 defines a business as ‘an integrated set of activities and
assets that is capable of being conducted and managed to provide
a return in the form of dividends, lower costs, or other economic
benefits’ (IFRS 3, Appendix A).

 If the assets purchased are not a business, then the transaction is
accounted for as an asset purchase

 If the assets purchased are a business then consolidate using the
acquisition method.

The acquisition method has four key features:

Identify the
Identify the acquisition
acquirer
date

ACQUISITION METHOD

Recognise
Recognise the
net assets goodwill and
NCI
.

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