• IAS 22, Business Combinations

History

• Issued July 1998.
• Effective date: Business combinations given initial accounting recognition in periods beginning on or after 1 August 1998
• Superseded by and incorporated into IFRS 3 effective 31 March 2004.

The issue resolved by SIC 9 is how the definitions in IAS 22.09 and the additional guidance in IAS 22.11 to 13 and in IAS 22.14 to 17 are to be interpreted and applied in classifying a business combination and whether a business combination under IAS 22 might be classified as neither an acquisition nor a uniting of interests.

SIC 9 concludes that the overriding criterion to distinguish an acquisition from a uniting of interests is whether an acquirer can be identified, i.e. whether the shareholders of one of the combining enterprises obtain control over the combined enterprise. The classification of a business combination and the determination of whether control exists should be based on an overall evaluation of all relevant facts and circumstances of the transaction; the guidance given in IAS 22 provides examples of important factors to be considered, not a comprehensive set of conditions to be met.

In addition, the Interpretation clarifies that a business combination is to be classified as an acquisition, unless the criteria of IAS 22.16 are met (exchange or pooling of the substantial majority of the voting common shares of the combining enterprises, relative equality in fair values of the combining enterprises and continuance of substantially the same percentage in voting rights and interests of the shareholders of each of the combining enterprises in the combined enterprise). Even if all three criteria are met, a business combination is only to be classified as a uniting of interests if no acquirer can be identified.