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28 March 2019

EFRAG's endorsement advice on Definition of a Business (Amendments to IFRS 3)

EFRAG has submitted its endorsement advice relating to Definition of a Business (Amendments to IFRS 3) for use in the EU and EEA to the EC.

The Amendments respond to concerns reported by stakeholders during the Post-implementation Review of IFRS 3 about how to interpret and apply the definition of a business, with the objective to clarify the definition and assist entities to determine whether a transaction should be accounted for as a business combination or as an asset acquisition.

The Amendments shall be applied to transactions for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 January 2020, with earlier application permitted. If entities apply the Amendments earlier, they shall disclose that fact.

EFRAG has concluded that the Amendments meet the qualitative characteristics of relevance, reliability, comparability and understandability required to support economic decisions and the assessment of stewardship, and raise no issues regarding prudent accounting. EFRAG has also assessed that the Amendments do not create any distortion in their interaction with other IFRS Standards and that all necessary disclosures are required. Therefore, EFRAG has concluded that the Amendments are not contrary to the true and fair view principle.

EFRAG has assessed that the Amendments would improve financial reporting and would reach an acceptable cost-benefit trade-off. EFRAG has not identified that the Amendments could have any adverse effect on the European economy, including financial stability and economic growth. Accordingly, EFRAG assesses that endorsing the Amendments is conducive to the European public good.

Full press release

Full endorsement advice

© EFRAG - European Financial Reporting Advisory Group

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