Convergence and Divergence Regarding Business Combinations

Introduction

Intangible assets acquired in a business combination, including a project represented by an internal research and development process, are recognized in accordance with IFRS 3 as assets separated from goodwill if they meet the definition and criteria for recognizing assets, if they are separable or result from contractual or legal rights, and the fair value of the assets can be measured reliably (Ball, Li & Shivakumar, 2015; Iatridis, 2010; Guthrie & Parker, 2016).

Also, the same Standard stipulates that “in some circumstances, the acquirer may be required to make a subsequent payment to the seller, as compensation for a reduction in the value of the assets given, the equity instruments issued or the debts existing or assumed by the acquirer in exchange for control on the acquired company. This is the case when, for example, the acquirer guarantees the market price of the issued capital or debt instruments as part of the cost of the business combination and is required to issue additional capital or debt instruments to recover the initially determined cost. In such situations, no increase in the cost of the business combination is recognized. in the case of equity instruments, the fair value of the additional payment is offset by an equal reduction in the value attributed to the instruments originally issued. in the case of debt instruments, the additional payment is regarded as a reduction of the premium or an increase of the discount at the initial issue” (Choi, Peasnell & Toniato, 2013; Barth, Landsman & Lang, 2008;).

The high degree of competitiveness of an entity depends fundamentally on the degree of structuring, optimization and relationship between its processes. If the management of the entity wants lower production costs, lower delivery times and high quality of works, it must necessarily change its business processes. All the issues related to the mentioned issues are centralized and analyzed by a specialist, called a business analyst who will prepare two situations regarding the business processes of the entity: a current situation and a future situation that is desired. The business analyst also has the responsibility to facilitate, aggregate and monitor the business processes, while the management responsibility only includes providing the information necessary to guarantee the entire process. Ensuring success on the line of business process optimization can be translated by permanently optimized internal processes or by a methodology of permanent improvements.

The emphasis in this standard is on the accounting treatment at the date of purchase. In particular, it provides that all business combinations will be accounted for by applying the acquisition method (Schleicher, Tahoun & Walker, 2010).

There may be situations where more investors are interested in investing in the same entity (Ball, Li & Shivakumar, 2015). They may at any time have a greater or lesser influence on the entity, but only one of them may have control (Iatridis, 2010). Other investors may have the right to participate in decision-making on the activities of the entity, which may eventually constitute evidence of significant influence, but not of control (Cairns, Massoudi, Taplin & Tarca, 2011).