Our Financial Reporting Expert Group contributed to our response to the IASB's Exposure Draft – Definition of a Business and Accounting for Previously Held Interests (Proposed Amendments to IFRS 3 and IFRS 11).
We welcomed the IASB’s initiative to provide entities with clearer application guidance to help distinguish between a business and a group of assets when applying IFRS 3.
Nonetheless, we noted that the proposed amendments to define a business do not sufficiently clarify the difference between a business and a group of assets to justify amending the existing text. We remarked that the proposed amendments may to some extent add complexity and therefore make it more difficult to apply IFRS 3 and IFRS 11 in practice.
We commented that some of the examples provided seemed slightly contradictory or unclear, in particular regarding the acquisition of property shown in examples H and I, where we do not consider the transfer of employees alone is sufficient to justify a difference in the accounting. Equally, we judged that the amendments do not provide a clear response as to how to proceed in case it is concluded that the set of activities and assets is not a business.
We encouraged the IASB to add these amendments to a future review of IFRS 3 and IFRS 11 which takes into consideration the wider impact of these standards.