6. Annex NSA IFRS 3
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Amendments to IFRS 3 Business Combinations
Paragraph 11 is amended and the footnote to Framework for the Preparation and Presentation of Financial
Statements in paragraph 11 is deleted. Paragraphs 14, 21, 22 and 23 are amended and paragraphs 21A,
21B, 21C, 23A and 64Q are added. A heading is added above paragraph 21A and the headings below
paragraph 21 and above paragraph 22 are amended. New text is underlined and deleted text is struck
through. Paragraph 10 is unamended but is included for ease of reference.
The acquisition method
Recognising and measuring the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree
Recognition principle
10As of the acquisition date, the acquirer shall recognise, separately from goodwill, the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree. Recognition of identifiable assets acquired and liabilities assumed is subject to the conditions specified in paragraphs 11 and 12.
11To qualify for recognition as part of applying the acquisition method, the identifiable assets acquired
and liabilities assumed must meet the definitions of assets and liabilities in the Framework for the
Preparation and Presentation of Financial Statements* Conceptual Framework for Financial
Reporting at the acquisition date. For example, costs the acquirer expects but is not obliged to incur
in the future to effect its plan to exit an activity of an acquiree or to terminate the employment of or
relocate an acquiree's employees are not liabilities at the acquisition date. Therefore, the acquirer
does not recognise those costs as part of applying the acquisition method. Instead, the acquirer
recognises those costs in its post-combination financial statements in accordance with other IFRSs.
For this Standard, acquirers are required to apply the definitions of an asset and a liability and
supporting guidance in the IASC's Framework for the Preparation and Presentation of Financial
Statements adopted by the IASB in 2001 rather than the Conceptual Framework for Financial Reporting
issued in 2018.
Recognition conditions
14Paragraphs B31-B40 provide guidance on recognising intangible assets. Paragraphs 2221A-28B specify the types of identifiable assets and liabilities that include items for which this IFRS provides limited exceptions to the recognition principle and conditions.
Exceptions to the recognition or measurement principles
21This IFRS provides limited exceptions to its recognition and measurement principles. Paragraphs 2221A-31A specify both the particular items for which exceptions are provided and the nature of those exceptions. The acquirer shall account for those items by applying the requirements in paragraphs 2221A-31A, which will result in some items being:
- recognised either by applying recognition conditions in addition to those in paragraphs 11 and 12 or by applying the requirements of other IFRSs, with results that differ from applying the recognition principle and conditions.
- measured at an amount other than their acquisition-date fair values.
ExceptionExceptions to the recognition principle
Liabilities and contingent liabilities within the scope of IAS 37 or IFRIC 21
21AParagraph 21B applies to liabilities and contingent liabilities that would be within the scope of IAS 37 Provisions, Contingent Liabilities and Contingent Assets or IFRIC 21 Levies if they were incurred separately rather than assumed in a business combination.
21BThe Conceptual Framework for Financial Reporting defines a liability as 'a present obligation of the entity to transfer an economic resource as a result of past events'. For a provision or contingent liability that would be within the scope of IAS 37, the acquirer shall apply paragraphs 15-22 of IAS 37 to determine whether at the acquisition date a present obligation exists as a result of past events. For a levy that would be within the scope of IFRIC 21, the acquirer shall apply IFRIC 21 to determine whether the obligating event that gives rise to a liability to pay the levy has occurred by the acquisition date.
21CA present obligation identified in accordance with paragraph 21B might meet the definition of a contingent liability set out in paragraph 22(b). If so, paragraph 23 applies to that contingent liability.
Contingent liabilities and contingent assets
22IAS 37-Provisions, Contingent Liabilities and Contingent Assets defines a contingent liability as:
- a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity; or
- a present obligation that arises from past events but is not recognised because:
- it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or
- the amount of the obligation cannot be measured with sufficient reliability.
23The requirements in IAS 37 do not apply in determining which contingent liabilities to recognise as of
the acquisition date. Instead, the The acquirer shall recognise as of the acquisition date a contingent
liability assumed in a business combination if it is a present obligation that arises from past events and
its fair value can be measured reliably. Therefore, contrary to paragraphs 14(b), 23, 27, 29 and 30 of
IAS 37, the acquirer recognises a contingent liability assumed in a business combination at the
acquisition date even if it is not probable that an outflow of resources embodying economic benefits
will be required to settle the obligation. Paragraph 56 of this IFRS provides guidance on the subsequent
accounting for contingent liabilities.
23AIAS 37 defines a contingent asset as 'a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity'. The acquirer shall not recognise a contingent asset at the acquisition date.
Effective date and transition
Effective date
64QReference to the Conceptual Framework, issued in May 2020, amended paragraphs 11, 14, 21, 22 and 23 and added paragraphs 21A, 21B, 21C and 23A. An entity shall apply those amendments to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 January 2022. Earlier application is permitted if at the same time or earlier an entity also applies all the amendments made by Amendments to References to the Conceptual Framework in IFRS Standards, issued in March 2018.