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EFRAG/OIC Discussion Paper ‘Accounting for Business Combinations under Common Control’


The European Financial Reporting Advisory Group and the Organismo Italiano di Contabilità have published today a Discussion Paper ‘Accounting for Business Combinations under Common Control’.  The Discussion Paper is part of EFRAG’s ongoing proactive work with European National Standard Setters.


The objective of the project is to stimulate debate about how business combinations under common control should be reflected in the financial statements.  It is an area of financial reporting where opinions remain divided on what is the best approach to account for such transactions.  At present, IFRS is silent on how to account for business combinations under common control and a number of different approaches are applied in practice.

The DP represents a first step in responding to the diversity that exists.  It includes a comprehensive analysis of the issues and of the relevant IFRS literature.  The analysis begins from the needs of users of the financial statements and considers what information is likely to assist them in understanding the impact of such transaction on the reporting entity.  Whilst drawing on IFRS 3 Business Combinations it is not presumed that the acquisition method in that standard is necessarily the best approach.  It notes that there is no ´ideal´ accounting approach but draws out three different views or ways of looking at the problem. The Discussion Paper does not favour one view over another, but presents them as different points on a ´spectrum´ of thinking about the issues, highlighting some of the strengths and weaknesses of each view.

The issue of the Discussion Paper is supported by 16 standard-setters in Europe.

The Discussion Paper is open for comment until 30 April, 2012 and can be downloaded here or from the EFRAG website, together with a short presentation on its content.




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