Business combinations
The Association of Chartered Certified Accountants (ACCA) is pleased to have this opportunity to comment on the above position paper issued by the G4+1 group of standard setters. The paper and the questions that it raises for comment were considered by ACCA's Financial Reporting Committee at a recent meeting the following are their views.
We accept the main argument of the paper that all business combinations should be accounted for by the purchase method, and that no other method should be allowed.
We think that cases where no acquirer can be identified will be very rare indeed. For those few cases, however, objective criteria should be developed to determine which entity is designated as acquirer, In other words we favour alternative (b) in Question 5. The shares of post-combination market capitalisation seems a possible such measure.
As far as UK accounting standards are concerned, we would agree with the ASB that a revision of FRS6 along the lines of this paper is not an immediate priority. If the single method of accounting for business combinations were to become the established international norm, then we think that UK standards should follow this line as well in due course.