25263 bd IFRS3 IAS27:25263 IFRS3/IAS27 bd
4/7/08
10:03
Page 111
Reverse acquisitions
Under IFRS 3(2008), such transactions should not be described as reverse acquisitions. An appropriate accounting policy may describe them as ‘capital restructurings’ or ‘reverse asset acquisitions’. Such an accounting policy may result in consolidated financial statements that are similar to those produced under reverse acquisition accounting. 14.1.3 More complex cases The guidance on identifying the acquirer in chapter 6 is relevant in a reverse acquisition transaction. Beyond this, IFRS 3(2008) does not provide detailed guidance for more complex arrangements (e.g. where the accounting acquirer had a previously-held interest in the accounting acquiree). It is suggested that the two primary factors that might lead to the conclusion that the transaction involves a reverse acquisition are: •
the former shareholders of the entity whose shares are acquired own the majority of shares, and control the majority of votes, in the combined entity; and
•
the management of the combined entity is drawn predominantly from the entity whose shares are acquired.
14.2
Accounting for a reverse acquisition
There are no substantive differences between the accounting treatment prescribed for reverse acquisitions under IFRS 3(2004) and under IFRS 3(2008). Both versions of IFRS 3 aim to achieve an accounting outcome that reflects the consolidated financial statements as if the accounting acquirer had legally acquired the accounting acquiree. In other words, the legal form of the business combination should not impact the accounting for the substance of the business combination. 14.2.1 Accounting periods Consolidated financial statements prepared following a reverse acquisition are issued under the name of the legal parent (accounting acquiree) but described in the notes as a continuation of the financial statements of the legal subsidiary (accounting acquirer), with one adjustment, which is to adjust retroactively the accounting acquirer’s legal capital to reflect the legal capital of the accounting acquiree. That adjustment is required to reflect the capital of the legal parent (the accounting acquiree). Comparative information presented in those consolidated financial statements also is retroactively adjusted to reflect the legal capital of the legal parent (accounting acquiree). [IFRS 3(2008).B21] Separate entity financial statements for the legal parent, if required, would be prepared on a stand-alone basis. Where the entity was formed shortly before the combination, its entity financial statements would cover only its actual accounting period.
111