8 December 2020To:
Members of the Hong Kong Institute of CPAsAll other interested partiesINVITATION TO COMMENT ON IASB DISCUSSION PAPERDP/2020/2 Business Combinations under Common ControlComments to be received by 5 July 2021The Financial Reporting Standards Committee (FRSC) of the Hong Kong Institute ofCertified Public Accountants (Institute) is seeking comments on the IASB Discussion PaperDP/2020/2 Business Combinations under Common Control. The Discussion Paper isavailable on the Institute's website:
http://www.hkicpa.org.hk/en/standards-and-regulations/standards/financial-reporting/exposure-drafts/IFRS 3 Business Combinations sets out requirements for mergers and acquisitions ─referred to as business combinations in IFRS Standards. However, the scope of IFRS 3explicitly excludes business combinations under common control ─ combinations in whichall of the combining companies or businesses are ultimately controlled by the same partyor parties, both before and after the combination. Such combinations are common in manyjurisdictions, including Hong Kong.In the absence of a specifically applicable IFRS Standard for such combinations,companies are required to develop their own accounting policy for these transactions. Insome cases, they provide fair-value information about the acquired company and in othercases, they provide book-value information. Moreover, book-value information is providedin various ways and is often insufficient. This diversity in practice makes it difficult for usersof financial statements to understand and compare the financial effects of suchcombinations.The Discussion Paper sets out the International Accounting Standards Board (IASB)’spreliminary views on how to reduce the diversity in practice and improve the transparencyand comparability in reporting business combinations under common control. The IASB’sview is that companies should provide similar information about similar businesscombinations when the benefits of providing that information outweigh its costs. The IASB’spreliminary suggestion is that fair-value information should be provided when a businesscombination under common control affects shareholders outside the group. In other cases,the IASB is suggesting that book-value information should be provided using a singlespecified approach.Furthermore, the book-value approach suggested by the IASB is different from theapproach under Accounting Guideline 5 Merger Accounting for Common ControlCombinations. Accordingly, the IASB’s preliminary views on when and how each approachshould be applied may have a significant impact on the existing accounting practices inHong Kong.The FRSC invites your comments on the Discussion Paper by 5 July 2021 to allow yourcomments to be considered in developing its response to the IASB. Comments should besupported by specific reasoning and should be submitted in written form.Comments may be sent by mail, fax or e-mail to:
Standard Setting DepartmentHong Kong Institute of Certified Public Accountants37th Floor, Wu Chung House213 Queen’s Road EastWanchai, Hong KongFax number (+852) 2865 6776E-mail: commentletters@hkicpa.org.hkComments will be acknowledged and may be made available for public review unlessotherwise requested by the respondent.Page 2 of 2
Invitation to Comment on IASB Discussion Paper DP/2020/2 Business Combinations under Common Control
下载原件8 December 2020To:
Members of the Hong Kong Institute of CPAsAll other interested partiesINVITATION TO COMMENT ON IASB DISCUSSION PAPERDP/2020/2 Business Combinations under Common ControlComments to be received by 5 July 2021The Financial Reporting Standards Committee (FRSC) of the Hong Kong Institute ofCertified Public Accountants (Institute) is seeking comments on the IASB Discussion PaperDP/2020/2 Business Combinations under Common Control. The Discussion Paper isavailable on the Institute's website:
http://www.hkicpa.org.hk/en/standards-and-regulations/standards/financial-reporting/exposure-drafts/IFRS 3 Business Combinations sets out requirements for mergers and acquisitions ─referred to as business combinations in IFRS Standards. However, the scope of IFRS 3explicitly excludes business combinations under common control ─ combinations in whichall of the combining companies or businesses are ultimately controlled by the same partyor parties, both before and after the combination. Such combinations are common in manyjurisdictions, including Hong Kong.In the absence of a specifically applicable IFRS Standard for such combinations,companies are required to develop their own accounting policy for these transactions. Insome cases, they provide fair-value information about the acquired company and in othercases, they provide book-value information. Moreover, book-value information is providedin various ways and is often insufficient. This diversity in practice makes it difficult for usersof financial statements to understand and compare the financial effects of suchcombinations.The Discussion Paper sets out the International Accounting Standards Board (IASB)’spreliminary views on how to reduce the diversity in practice and improve the transparencyand comparability in reporting business combinations under common control. The IASB’sview is that companies should provide similar information about similar businesscombinations when the benefits of providing that information outweigh its costs. The IASB’spreliminary suggestion is that fair-value information should be provided when a businesscombination under common control affects shareholders outside the group. In other cases,the IASB is suggesting that book-value information should be provided using a singlespecified approach.Furthermore, the book-value approach suggested by the IASB is different from theapproach under Accounting Guideline 5 Merger Accounting for Common ControlCombinations. Accordingly, the IASB’s preliminary views on when and how each approachshould be applied may have a significant impact on the existing accounting practices inHong Kong.The FRSC invites your comments on the Discussion Paper by 5 July 2021 to allow yourcomments to be considered in developing its response to the IASB. Comments should besupported by specific reasoning and should be submitted in written form.Comments may be sent by mail, fax or e-mail to:
Standard Setting DepartmentHong Kong Institute of Certified Public Accountants37th Floor, Wu Chung House213 Queen’s Road EastWanchai, Hong KongFax number (+852) 2865 6776E-mail: commentletters@hkicpa.org.hkComments will be acknowledged and may be made available for public review unlessotherwise requested by the respondent.Page 2 of 2