IFRS 3, Business Combinations, is to improve the relevance, reliability, and comparability of an entity’s financial statements with respect to the information provided about business combinations and their effects. IFRS 3 establishes principles and requirements regarding recognition and measurement of identifiable assets and goodwill acquired, liabilities assumed, any non-controlling interest in the acquiree, and any gains from a bargain purchase.
The objective of IFRS 10, Consolidated Financial Statements, is quite straightforward — to establish principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities.
To meet the objective, IFRS 10:
- requires an entity (the parent) that controls one or more other entities (subsidiaries) to present consolidated financial statements;
- defines the principle of control, and establishes control as the basis for consolidation;
c) sets out how to apply the principle of control to identify whether an investor controls an investee and therefore must consolidate the investee;
- sets out the accounting requirements for the preparation of consolidated financial statements [¶2].
IFRS 10 does not deal with the accounting requirements for business combinations and their effect on consolidation, including goodwill arising on a business combination. That goal remains with IFRS 3 Business Combinations [¶3].
IFRS 12 Disclosure of Interests in Other Entities mandates disclosures such that users of financial statements can evaluate the nature of, and risks associated with, an entity’s interests in other entities, and the effects of those interests on its financial position, financial performance, and cash flows.