Requirements For Accounting Of Business Combinations

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1. Exclusions of AASB 3 AASB 3 has defined business and business combination in appendix A as: A business is an integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing return in the form of dividends, lower costs or other economic benefits directly to the investors or other owners, members or participants. A business combination is a transaction or other event in which an acquirer obtains control of one or more business. AASB 3 applies to all the general form of business combinations but exclusions are:  If the business combination results in the formation of the joint venture then such business combinations are exclusions from the scope of AASB 3  If the business combination involves business under common control then also such business combinations are exclusions from scope of AASB 3  If the acquisition of assets that do not constitute a business then such combinations are exclusions from the scope of AASB 3 2. Requirements for Accounting of Business Combinations AASB 3 has set standard method of accounting for any business combination, which requires application of the acquisition method and involves the following steps: 1) Identifying the acquirer One of the entities in business combination must be identified as acquirer where an acquirer is the entity that obtains the control of acquiree. 2) Determining the acquisition date It is the date at which the acquirer obtains the control of the acquiree that
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