United States

IASB amends definition of a business

FINANCIAL REPORTING INSIGHTS  | 

Currently International Financial Reporting Standard (IFRS) 3, Business Combinations, defines a business as an integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing a return in the form of dividends, lower costs or other economic benefits directly to investors or other owners, members or participants. Recently the International Accounting Standards Board (IASB) amended this definition to emphasize that the output of a business is to provide goods and services to customers. The narrow-scope amendments to IFRS 3 now define a business as an integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing goods or services to customers, generating investment income (such as dividends or interest) or generating other income from ordinary activities.

Companies are required to apply the amended definition of a business to acquisitions that occur on or after January 1, 2020. Earlier application is permitted. The amendments also provide supplementary guidance.