IASB DP/2020/2

  • For-profit

Business Combinations under Common Control

The International Accounting Standards Board (IASB) has recently issued for comment DP/2020/2 Business Combinations under Common Control (the DP).

Transfers of businesses between entities within the same group – known as ‘business combinations under common control’ – are common in New Zealand and in many other countries.

IFRS Standards do not specify how to account for such transactions.

As a result, similar business combinations are accounted for differently by different entities. This diversity in practice makes it difficult for investors to understand the effects of such transactions on entities that undertake them and to compare entities that undertake similar transactions.

The DP sets out the IASB’s preliminary views on how to fill this gap in IFRS Standards. The IASB’s aim is to reduce diversity in practice and to improve transparency and comparability in reporting on business combinations under common control.

The IASB’s view is that entities should provide similar information about similar business combinations when the benefits of that information to investors outweigh the costs of providing it.

Specifically, the IASB is suggesting that business combinations under common control should be accounted for as follows.

  • When shareholders outside the group (non-controlling shareholders) are affected, the transaction should generally be accounted for under the acquisition method, using fair value information. That suggestion is consistent with the existing requirements in IFRS 3 Business Combinations for mergers and acquisitions between unrelated entities.
  • In all other cases, a book value method should be applied, using a single method to be specified in IFRS Standards.

The IASB’s brief video below summarises the content of the DP.

Watch the video

The New Zealand Accounting Standards Board (NZASB) encourages you to read the DP and to comment on the proposals.

While further consultation is expected before the IASB issues any new or amended standards (if any) on the matters considered in the DP, such consultation will be influenced by comments received on the DP.

The XRB Board is committed to adopting international standards in the for-profit sector. Generally, once a standard has been issued by the IASB, the NZASB then issues the New Zealand equivalent standard without further consultation.


Commenting on the Discussion Paper

This is your opportunity to comment on the Discussion Paper.

Comments are due to the NZASB by 9 July 2021 and to the IASB by 1 September 2021.

Send your comments—both formal and informal—to the NZASB using the secure upload form below.

We also encourage you to send comments directly to the IASB, with a copy to the NZASB. Your comments can be made electronically to the IASB website by clicking on the following link https://www.ifrs.org/projects/open-for-comment/. First-time users must register to submit electronically.


Upload your submission here

Please use this secure online form.

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  • Upload an MS Word document (and a PDF file, if you wish); or
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Please note:

  • We would appreciate receiving a copy of your comments in electronic form (preferably Microsoft Word format).  This helps us to more efficiently collate and analyse comments. Please also specify the exposure draft number and title in your electronic file. 

  • Tell us on whose behalf you are making the comments (for example on behalf of a group or an entity).

  • We intend publishing all comments on the XRB website, unless they may be defamatory. If you have any objection to this, we will not publish them. However, they will remain subject to the Official Information Act 1982 and, therefore, may be released in part or in full. The Privacy Act 1993 also applies.

  • If you have an objection to the release of any information contained in your comments, we would appreciate you identifying the parts of your comments to be withheld, and the grounds under the Official Information Act 1982 for doing so (for example, that it would be likely to unfairly prejudice the commercial position of the person providing the information).