BUSINESS
COMBINATION.
PFRS 3
• BUSINESS COMBINATION
• A TRANSACTION OR OTHER EVENT IN WHICH AN ACQUIRER OBTAINS
CONTROL OF ONE OR MORE BUSINESSES.
DEFINED UNDER PFRS STANDARD
• BUSINESS
• AN INTEGRATED SET OF ACTIVITIES AND ASSETS THAT IS CAPABLE OF BEING
CONDUCTED AND MANAGED FOR THE PURPOSE OF PROVIDING GOODS OR
SERVICES TO CUSTOMERS, GENERATING INVESTMENT INCOME (SUCH AS
DIVIDENDS OR INTEREST) OR GENERATING OTHER INCOME FROM ORDINARY
ACTIVITIES*
DEFINED UNDER PFRS STANDARD
• BUSINESS
• AN INTEGRATED SET OF ACTIVITIES AND ASSETS THAT IS CAPABLE OF BEING
CONDUCTED AND MANAGED FOR THE PURPOSE OF PROVIDING GOODS OR
SERVICES TO CUSTOMERS, GENERATING INVESTMENT INCOME (SUCH AS
DIVIDENDS OR INTEREST) OR GENERATING OTHER INCOME FROM ORDINARY
ACTIVITIES*
SUPPOSE
• COMPANY A PURCHASE THE WHOLE INVENTORY OF
COMPANY B,
• ITO BA AY EXAMPLE NG BUSINESS COMBINATION?
• COMPANY A PURCHASE THE WHOLE SHARES OF
STOCKS OF COMPANY B,
• ITO BA AY EXAMPLE NG BUSINESS COMBINATION?
• COMPANY A PURCHASE THE 40% INTEREST OF
COMPANY B,
• ITO BA AY EXAMPLE NG BUSINESS COMBINATION?
LEGAL FORMS
• STATUTORY MERGER
• A + B = A OR B
• CONSOLIDATION
• A+B= C
• ACQUISITION OF STOCKS
• A+ B=A+ B
TYPES OF BUSINESS COMBINATION
• HORIZONTAL - SAME INDUSTRY ACQUISITION
• VERTICAL - CUSTOMER SUPPLIER ACQUISITION
• CONGLOMERATION - UNRELATED
• MARKET EXTENSION - SAME PRODUCT, DIFFERENT MARKET
• PRODUCT EXTENSION - DIFFERENT ENTITY BUT RELATED
PRODUCTS
• ANG ACCOUNTING FOR BUSINESS
COMBINATION AY ANG ACCOUNTING
IN SHORT SA PAGSASANIB NG DALAWANG
BUSINESSS
ACCOUNTING FOR BUSINESS COMBINATION
ACCOUNTING FOR BUSINESS COMBINATION
• POOLING OF INTEREST METHOD
• ACQUISITION METHOD
ACCOUNTING FOR BUSINESS COMBINATION
• POOLING OF INTEREST METHOD
• HISTORICAL BOOK VAUE AANG GINAGAMIT SA PAGVALUE NG NET ASSET NG
ACQUIREE
ACCOUNTING FOR BUSINESS COMBINATION
• ACQUISITION METHOD
• FAIR MARKET VAUE ANG GINAGAMIT SA PAGVALUE NG NET ASSET NG
ACQUIREE
UNDER THE PFRS 3 STANDARD ETO YUNG
GAGAMITIN NATIN
• ACQUISITION METHOD
• FAIR MARKET VAUE ANG GINAGAMIT SA PAGVALUE NG NET ASSET NG
ACQUIREE
FOUR STEPS OF BUSINESS COMBINATION
• ACQUISITION METHOD
FOUR
STEPS OF
BUSINESS • 1. IDENTIFY THE ACQUIRER
COMBINATI
ON
IDENTIFY • SA BUSINESS COMBINATION MAY
NAG AACQUIRE AT MERON DIN
THE INAACUIRE
ACQUIRER
SINO YUNG NAG
ACQUIRE?
• SA BUSINESS COMBINATION MAY NAG
AACQUIRE AT MERON DIN INAACUIRE
SEE? SI JOLLIBEE ANG
NAG ACQUIRE
• SA BUSINESS COMBINATION MAY NAG
AACQUIRE AT MERON DIN INAACUIRE
ETO ANG TREATMENT
NATIN SA KANILA
• SUBSIDIARY
• Parent
IDENTIFY THE
ACQUIRER
• ANG TAWAG KAY JOLLIBEE AY
ACQUIRER
FOUR STEPS
OF BUSINESS • 1. IDENTIFY THE ACQUIRER
COMBINATIO • 2. DETERMINE THE ACQUISITION
DATE
N
DETERMINE THE • THE DATE ON WHICH THE ACQUIRER
OBTAINS CONTROL OF THE ACQUIREE
ACQUISITION DATE
DETERMINE THE ACQUISITION DATE
• IFRS 3 DOES NOT PROVIDE DETAILED GUIDANCE ON THE DETERMINATION OF
THE ACQUISITION DATE AND THE DATE IDENTIFIED SHOULD REFLECT ALL
RELEVANT FACTS AND CIRCUMSTANCES. CONSIDERATIONS MIGHT INCLUDE,
AMONG OTHERS, THE DATE A PUBLIC OFFER BECOMES UNCONDITIONAL
(WITH A CONTROLLING INTEREST ACQUIRED), WHEN THE ACQUIRER CAN
EFFECT CHANGE IN THE BOARD OF DIRECTORS OF THE ACQUIREE, THE DATE
OF ACCEPTANCE OF AN UNCONDITIONAL OFFER, WHEN THE ACQUIRER
STARTS DIRECTING THE ACQUIREE'S OPERATING AND FINANCING POLICIES,
OR THE DATE COMPETITION OR OTHER AUTHORITIES PROVIDE NECESSARILY
CLEARANCES.
DETERMINE THE ACQUISITION DATE
• IFRS 3 DOES NOT PROVIDE DETAILED GUIDANCE ON THE DETERMINATION OF
THE ACQUISITION DATE AND THE DATE IDENTIFIED SHOULD REFLECT ALL
RELEVANT FACTS AND CIRCUMSTANCES. CONSIDERATIONS MIGHT INCLUDE,
AMONG OTHERS, THE DATE A PUBLIC OFFER BECOMES UNCONDITIONAL
(WITH A CONTROLLING INTEREST ACQUIRED), WHEN THE ACQUIRER CAN
EFFECT CHANGE IN THE BOARD OF DIRECTORS OF THE ACQUIREE, THE DATE
OF ACCEPTANCE OF AN UNCONDITIONAL OFFER, WHEN THE ACQUIRER
STARTS DIRECTING THE ACQUIREE'S OPERATING AND FINANCING POLICIES,
OR THE DATE COMPETITION OR OTHER AUTHORITIES PROVIDE NECESSARILY
CLEARANCES.
• 1. IDENTIFY THE ACQUIRER
FOUR STEPS OF • 2. DETERMINE THE ACQUISITION DATE
BUSINESS • 3. MEASURE THE FAIR VALUE OF THE
ACQUIREE
COMBINATION
MEASURE THE FAIR VALUE OF THE ACQUIREE
• IFRS 3 ESTABLISHES THE FOLLOWING PRINCIPLES IN RELATION TO THE
RECOGNITION AND MEASUREMENT OF ITEMS ARISING IN A BUSINESS
COMBINATION:
• RECOGNITION PRINCIPLE. IDENTIFIABLE ASSETS ACQUIRED, LIABILITIES
ASSUMED, AND NON-CONTROLLING INTERESTS IN THE ACQUIREE, ARE
RECOGNIZED SEPARATELY FROM GOODWILL
• MEASUREMENT PRINCIPLE. ALL ASSETS ACQUIRED AND LIABILITIES
ASSUMED IN A BUSINESS COMBINATION ARE MEASURED AT ACQUISITION-
DATE FAIR VALUE.
MEASURE THE FAIR VALUE OF THE ACQUIREE
• IFRS 3 ESTABLISHES THE FOLLOWING PRINCIPLES IN RELATION TO THE
RECOGNITION AND MEASUREMENT OF ITEMS ARISING IN A BUSINESS
COMBINATION:
• RECOGNITION PRINCIPLE. IDENTIFIABLE ASSETS ACQUIRED, LIABILITIES
ASSUMED, AND NON-CONTROLLING INTERESTS IN THE ACQUIREE, ARE
RECOGNIZED SEPARATELY FROM GOODWILL
• MEASUREMENT PRINCIPLE. ALL ASSETS ACQUIRED AND LIABILITIES
ASSUMED IN A BUSINESS COMBINATION ARE MEASURED AT ACQUISITION-
DATE FAIR VALUE.
WHAT IS FAIR VALUE?
• VALUES AGREED UPON BY THE PARTIES.
• 1. IDENTIFY THE ACQUIRER
• 2. DETERMINE THE ACQUISITION DATE
FOUR STEPS OF • 3. MEASURE THE FAIR VALUE OF THE
BUSINESS ACQUIREE
COMBINATION • 4. RECOGNITION OF GOODWILL OR
GAIN ON BARGAIN PURCHASE.
• IF THE DIFFERENCE ABOVE IS NEGATIVE, THE RESULTING GAIN IS A
BARGAIN PURCHASE IN PROFIT OR LOSS, WHICH MAY ARISE IN
CIRCUMSTANCES SUCH AS A FORCED SELLER ACTING UNDER COMPULSION.
• HOWEVER, BEFORE ANY BARGAIN PURCHASE GAIN IS RECOGNISED IN
PROFIT OR LOSS, THE ACQUIRER IS REQUIRED TO UNDERTAKE A REVIEW TO
ENSURE THE IDENTIFICATION OF ASSETS AND LIABILITIES IS COMPLETE,
AND THAT MEASUREMENTS APPROPRIATELY REFLECT CONSIDERATION OF
ALL AVAILABLE INFORMATION.
