Business combinations: How will the new accounting standard affect you?

IFRS 3 (revised) introduced significant changes to accounting for business combinations. Two specific changes that are likely to affect pharmaceutical and life sciences entities are:

  • Definition of a business and the wider scope of IFRS 3 (revised)
  • Measurement of contingent consideration

These changes may bring more transactions into the scope of business combination accounting and are likely to introduce more volatility into an acquirer's income statement.

The IASB issued IFRS 3 (revised), 'Business combinations', in January 2008. The standard applies to all business combinations for which the acquisition date (the date on which control is obtained) is on or after the start of the first annual period beginning on or after 1 July 2009. For calendar year-end entities it is applicable to all acquisitions from 1 January 2010.

This publication explains the changes and contains examples to illustrate the issues of the new standard that are relevant to pharmaceutical and life sciences companies.