1. IFRS 3 – B USINESS COMBINATIONS and its comparison with IFRS 11 – Joint Arrangements Liliana Berezkinova, Aneta Jedličková 28.2.2012

2. IFRS 3 – BUSINESS COMBINATIONS Definition:,, A business combination is a transaction or event in which an acquirer obtains control of one or more businesses. A business is defined as an integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing a return directly to investors or other owners, members or participants’’ [IFRS 3.Appendix A]

3. IFRS 3 – BUSINESS COMBINATIONS This standard requires the use of the purchase method: Steps in applying the purchase method are: [IFRS 3.5] 1.Identification of the 'acquirer' – the combining entity that obtains control of the acquiree 2. Determination of the 'acquisition date' – the date on which the acquirer obtains control of the acquiree 3. Recognition and measurement of the identifiable assets acquired, the liabilities assumed, provisions for contingent liabilities, and any non-controlling interest (NCI, formerly called minority interest) in the acquiree 4. Recognition and measurement of goodwill or a gain from a bargain purchase

4. IFRS 3 – BUSINESS COMBINATIONS What is NOT considered a business combination? the formation of a joint venture, combinations of entities or businesses under common control the acquisition of an asset or a group of assets that do not constitute a business. [IFRS 3.2]

5. IFRS 11 - JOINT ARRANGEMENTS A joint arrangement is an arrangement of which two or more parties have joint control. [IFRS 11:4] A joint arrangement has the following characteristics: the parties are bound by a contractual arrangement, and the contractual arrangement gives two or more of those parties joint control of the arrangement. A joint arrangement is either a joint operation or a joint venture.

6. IFRS 11 - JOINT ARRANGEMENTS Joint arrangements would be classified as either joint operations (combining existing jointly controlled assets and jointly controlled operations) or joint ventures. A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. Those parties are called joint operators. [IFRS 11:15] A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. Those parties are called joint venturers. [IFRS 11:16]

7. S O REMEMBER THAT … Business combinations don’t involve joint control and concern acquisitions above all. Whereas joint arrangements require joint control of 2 or more parties (companies).