In order to know if a Group re-structure would fall into a Business Combination or Common Control transaction, it would require careful understanding of the basic rules because in the absence of correct classification, it would make either wrong consolidation or might treat certain business combination at cost values which is apparently not allowed (unless it is common control transaction).
Let’s first know the difference between the Business Combination accounting and Common Control transaction and basic measurement difference which essentially make this analysis very crucial-
Business Combination-
Where an acquirer make an acquisition of a BUSINESS (not an asset acquisition) in which it obtains a CONTROL would fall under the definition of business combinations and such business combinations would be measured at FAIR VALUES of assets acquired and liabilities assumed,
Common Control transactions-
Often there are certain Group re-structuring takes place in which Shareholder of the Acquirer would remain same before and after the such acquisition and generally there is no economic substance of such transactions (e.g. these kind of structuring would be done just to extend the exiting business or for ease of doing processes etc.). Since there is no SUBSTANCE of Business Acquisition and shareholders would remain same, hence such transactions are being carried out at CARRYING VALUES only.
for further read please refer -http://gyanifrs.com/2017/05/group-structures-common-control-or-business-combinations-part-1/
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Let’s first know the difference between the Business Combination accounting and Common Control transaction and basic measurement difference which essentially make this analysis very crucial-
Business Combination-
Where an acquirer make an acquisition of a BUSINESS (not an asset acquisition) in which it obtains a CONTROL would fall under the definition of business combinations and such business combinations would be measured at FAIR VALUES of assets acquired and liabilities assumed,
Common Control transactions-
Often there are certain Group re-structuring takes place in which Shareholder of the Acquirer would remain same before and after the such acquisition and generally there is no economic substance of such transactions (e.g. these kind of structuring would be done just to extend the exiting business or for ease of doing processes etc.). Since there is no SUBSTANCE of Business Acquisition and shareholders would remain same, hence such transactions are being carried out at CARRYING VALUES only.
for further read please refer -http://gyanifrs.com/2017/05/group-structures-common-control-or-business-combinations-part-1/
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