The International Accounting Standards Board (IASB) has issued narrow-scope amendments to IFRS 3 Business Combinations to improve the definition of a business.
The previous definition, which focused on returns in the form of dividends, lower costs or other economic benefits to investors and others, has been amended to emphasise that the output of a business is to provide goods and services to customers. Over and above the wording amendment, the IASB has also provided supplementary guidance.
The amendments will help companies determine whether an acquisition made is of a business or a group of assets.
Companies are required to apply the amended definition of a business to acquisitions that occur on or after 1 January 2020. Earlier application is permitted.