On or about 31 May 2019, the International Accounting standards Board (IASB) has published proposed narrow-scope amendments to IFRS 3 Business Combinations.
These amendments will update a reference to the Conceptual Framework for Financial Reporting without changing the accounting requirements for business combinations.
IFRS 3 specifies how a company should account for the assets and liabilities it acquires when it obtains control of a business. It refers to an old version of the Conceptual Framework to determine what constitutes an asset or a liability. The IASB proposes to update IFRS 3 so it refers instead to the latest version, issued in March 2018.
Updating the reference without making any other changes to IFRS 3 could change the accounting requirements for business combinations because the liability definition in the 2018 Conceptual Framework is broader than that in previous versions. It would require companies to record provisions and contingent liabilities when they acquire a business they would not record in other circumstances.
The IASB also proposes that for provisions and contingent liabilities, companies should refer to IAS 37 Provisions, Contingent Liabilities and Contingent Assets instead of the Conceptual Framework to determine what constitutes a liability.
This change is proposed to stand still until IASB makes a decision regarding the amendment of IAS 37 to align it with the 2018 Conceptual Framework.
Comments should be submitted to the IFRS website by 27 September.
Source: IFRS website, 2 June 2019