IMPLEMENTATIONS OF IFRS3

Implementations of IFRS3

Implementations of IFRS3

Introduction

For many people, International Financial Reporting Standards (IFRS) appear as yet another game for accountants. Bankers, lawyers and investors should now be considering playing this game, too. IFRS 3 Business Combinations is a new accounting standard that became applicable to M&A deals closed on or after January 1, 2010, if the acquirer is located in Hong Kong, Singapore or any of the 110 other jurisdictions that have adopted IFRS(Riedl 2004 pp.823-852.). The new standard has been prepared by the International Accounting Standards Board (IASB) based on two key principles: 1) the acquired business should be measured based on its fair value and 2) taking control of a business is a critical event that should be reported as such to investors.

IFS 3

The IAS Regulation directly requires the use of IFRS as adopted by the EU (IFRS-EU) in the consolidated financial statements of publicly traded companies established in EU member states. Each member state may also extend the application of the IAS Regulation to permit or require the use of IFRS-EU in the legal entity financial statements of companies and the consolidated financial statements of non-publicly traded companies. The IAS Regulation has been effective in achieving the core objective of all publicly traded entities preparing consolidated financial statements in accordance with IFRS-EU, subject to the deferral of implementation in some countries to 2007 for entities with only debt securities admitted to trading or those entities listed on a non-EU market and using internationally accepted standards. Allowing member states discretion over the extent to which IFRS was to be used outside the consolidated financial statements of publicly traded entities has inevitably resulted in legal positions varying significantly. Some member states are prescriptive on the use of IFRS in the consolidated and legal entity financial statements, others allow some choice. A common theme is a more prescriptive regime for specific types of entity, particularly financial institutions. In many cases the legal position has changed from 2005. In view of the complex nature of the application of the IAS Regulation in member states and its continuing evolution, we consider it important that the European Commission cooperates with member states, the European Parliament and other organisations to monitor developments to ensure that information on the public record is up to date and accurate. 

 

Implications of the implementation of IFS 3

For many organizations, implementing IFRS may be a complex process that goes well beyond a simple technical exercise for the finance or accounting function. Other business areas such as human resources, investor relations, and business development and IT departments will likely be involved in the IFRS conversion plan. Companies that have already implemented IFRS know that the new standards place a sizeable responsibility on management to be able to communicate effectively to the market in the new language. Below we highlight several key considerations for those moving towards implementation. 

Transition and Timing

The Canadian AcSB IFRS Implementation Plan's (the Plan) objective is to migrate Canadian GAAP to IFRS through a fiveyear transition period. There are a number of areas in the Plan that may cause uncertainty for adopters, including the new accounting standards based on IFRS equivalents that the Plan proposes should be introduced in Canada during the ...