Clarifying business combinations accounting | KPMG | GI

Clarifying business acquisition accounting

Clarifying business acquisition accounting

IASB proposals may mean fewer transactions are business acquisitions, but how many fewer?


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Managing Director

KPMG in Gibraltar


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A problem fixed?

With a broad business definition, determining whether a transaction is an asset or a business acquisition has long been a challenging but important area of judgement. 

The IASB has issued proposed amendments to IFRS 3 Business Combinations that seek to clarify this matter.


“Clarification and narrowing of the current, vague definition of a business would be welcome. Currently, in a few sectors you are not necessarily on solid ground when you decide whether to account for an asset or a business acquisition.

Whilst the proposed tests may effect some narrowing, implementing them might be complex.” 

Mike Metcalf
KPMG’s global IFRS business combinations leader

A narrower definition of a business

The proposals aim to narrow the business definition and facilitate more robust decision making when assessing whether a set of acquired assets and activities constitutes a business. 

Our SlideShare presentation will help you to understand the proposals and the possible impacts for your company.

Questions remain

Business purchase and asset purchase accounting have different effects. For affected sectors, such as real estate and pharmaceuticals, the question is whether the proposals would result in more intuitive outcomes and make the business-or-asset purchase decision less subjective, less complex and less costly. 

Proposals on joint operations

The IASB has also issued proposed amendments to IFRS 3 and IFRS 11 Joint Arrangements. These aim to reduce diversity by clarifying the accounting treatment when a company increases its interest in a joint operation that meets the definition of a business – i.e. whether to remeasure or not.

Find out more

View our SlideShare presentation for a high-level visual summary of the proposals on the definition of a business. If you’re unable to view the presentation online, you can download a PDF version. 

This table explains whether a joint operation’s assets and liabilities should be remeasured at fair value when a company increases its interest.

For more information speak to your usual KPMG contact. We encourage you to submit your comments to the IASB by 31 October 2016.

Visit our IFRS – Business Combinations page for more information on the IASB’s consolidation suite of standards.

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