11/10/2021 - EFRAG's comment letter on the IASB's Discussion Paper DP/2020/2 Business Combinations under Common Control
EFRAG has published its comment letter in response to the IASB's Discussion Paper DP/2020/2 Business Combinations under Common Control. EFRAG welcomes the IASB's Discussion Paper and the IASB efforts to explore possible reporting requirements for business combinations under common control that would reduce diversity in practice and provide more relevant and comparable information.
In its comment letter, EFRAG welcomes the Discussion Paper Business Combinations under Common Control (BCUCC) and expresses cautious support for the proposed approach to select the measurement method.
EFRAG considers that the scope of the project should be extended to include how to measure investments in subsidiaries in the separate financial statements. EFRAG observes that all other transactions under common control are important and need to be discussed in a future comprehensive project. EFRAG also makes further suggestions on defining the scope in order to ensure the appropriate application of the IASB’s proposals.
EFRAG’s consultation and outreach resulted in mixed views regarding recognition as a contribution to equity of the excess fair value of the identifiable net assets over the consideration paid when applying the acquisition method to BCUCC transactions. Consequently, EFRAG suggests the IASB to further explore the possible approaches in order to provide relevant information to users of financial statements.
When applying a book-value method, EFRAG proposes two accounting policy options to allow the use of the carrying amounts in the consolidated financial statements of the transferred company’s controlling party and to provide pre-combination information retrospectively.
Finally, in its comment letter, EFRAG makes a number of recommendations to improve the IASB’s proposals.
EFRAG's comment letter can be found here.
