Business Combination And Its Effect On Business

1799 Words May 10th, 2016 8 Pages
Business Combination
According to Appendix A to AASB 3, a business combination is defined as an event or transaction in which an acquirer gets control over one or more businesses (Leo, Hoggett & Sweeting, 2012).
The purpose and objective of AASB 3 is to refine and upgrade the comparability, reliability and relevance of the information that is provided by a reporting entity about the business combination and its effect in its financial statements. This standard applies to those business combinations whose acquisition date is on or after 1 July 2009 (Compiled AASB Standard, 2010). The following chart depicts the above forms of business combinations:

(Source:http://www.yourarticlelibrary.com/business/forms-of-business/business-combination-concept-causes-and-forms/69426/)

Exclusions from scope of Accounting Standard AASB 3 Business Combinations
AASB 3 applies to those businesses whose transaction or event meets the definition of business combination. However, it does not apply to Business combination that:
 results in the formation of a joint venture. These business combinations are accounted under AASB11 Joint Arrangements.
 involves businesses or entities under common control
 has the acquired assets which does not constitute a business (Leo et al, 2014). In such cases, identification and recognition of acquired assets and assumed liabilities is required by acquirer and based on fair value at purchase date, cost of acquisition is allocated to each asset and…
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