IFRS 3 Business Combinations—Definition of a business.pdfVIP

IFRS Interpretations Agenda reference 4 Committee Meeting Staff Paper Date September 2011 Contact Thomas Harzheim tharzheim@ +44 (0)20 7246 0552 Project Annual Improvements—2010-2012 cycle Topic IFRS 3 Business Combinations—Definition of a business Introduction 1. In May 2011, the IFRS Interpretations Committee (the Committee) received a request seeking clarification on whether an asset with relatively simple processes associated with it meets the definition of a business in accordance with IFRS 3 Business Combinations . More specifically, the question is whether the acquisition of a single investment property, with lease agreements with multiple tenants over varying periods and with associated processes, such as cleaning, maintenance and administrative services such as rent collection, constitutes a business as defined in IFRS 3. 2. The Committee discussed the issue in the July 2011 meeting, with the July 2011 IFRIC Update reporting that: The Committee reviewed views received from outreach with the national standard-setters group and noted that the issue is widespread, that it has practical relevance and that there is significant divergence in practice. The Committee noted that the issue raises the question of whether there is any interaction between IAS 40 Investment Property and IFRS 3. It discussed services that are ‘ancillary services’ (as discussed in paragraphs 11-14 of IAS 40) that are not so significant as to disqualify a proper