Alert: Amended Definition of a Business in IFRS 3 Business Combinations

Category: IFRS

Alert: Amended Definition of a Business in IFRS 3 Business Combinations

In October 2018, the International Accounting Standards Board (“IASB”) issued an amendment to the definition of a business in IFRS 3 Business Combinations. The amendment was incorporated into Part I of the CPA Canada Handbook – Accounting by the Canadian Accounting Standards Board in December 2018. The amendment clarifies the definition of a business to simplify a company’s assessment of whether they have acquired a business or merely a group of assets.

The key features of the amendment are as follows:

  • Confirmation that a business must include inputs and processes.
    • The process must be substantive; and
    • Together, the inputs and process must significantly contribute to creating outputs.
  • A narrowed definition of outputs focusing on goods and services provided to customers and other income from ordinary activities, rather than providing dividends or other benefits to investors or lowering costs.
  • A simplified test to conclude that an asset acquisition has occurred, as opposed to a business combination, when the value of the assets acquired is substantially all concentrated in a single asset or group of similar assets.

The existing definition of a business is:

 “An integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing a return in the form of dividends, lower costs or other economic benefits directly to investors or other owners, members or participants.”

The new definition of a business is:

“An integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing goods or services to customers, generating investment income (such as dividends or interest) or generating other income from ordinary activities.”

The amended definition of a business applies to business combinations with an acquisition date that is on or after the beginning of the first annual reporting period beginning on or after January 1, 2020 and to asset acquisitions that occur on or after the beginning of that period. Earlier application is permitted.

The full history of this IASB project, including related supporting materials, can be accessed here.


This communication contains a general overview of the topic and is current as of December 13, 2018. The application of the principles addressed will depend upon the particular facts and circumstances of each individual case. Accordingly, this publication is not a substitute for professional advice and we recommend that any decisions you take about the application or not of any of the information presented be made in consultation with a qualified professional, who can address any variance that may be required to reflect your circumstances. Please contact your local MNP representative for customized assistance with the application of this material. MNP LLP accepts no responsibility or liability for any loss related to any person's use of or reliance upon this material. © MNP LLP 2018. All rights reserved.

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Michelle Balmer

Michelle Balmer CPA, CA

Vice President, Assurance

Michelle Balmer, CPA, CA, is a Senior Assurance Services Partner with MNP. With 14 years of experience in public practice, Michelle helps a broad range of public and privately held companies in a variety of industries. She also works on special projects, including costing studies, benchmarking and best-practice studies, operational analyses, litigation support and due diligence.

As a key member of MNP's Assurance team, Michelle has played an instrumental role in assurance policy development, implementing accounting and assurance standards firm-wide and educating assurance practitioners regarding methodologies and new pronouncements. She also provides technical advice and consultation on accounting and assurance issues, as well as on rules of professional conduct issues, to all MNP practitioners.

Michelle was certified a Chartered Accountant (CA) after obtaining a Bachelor of Commerce degree from the University of Alberta. She has been actively involved with the Institute of Chartered Accountants of Alberta, including the Chartered Accountants School of Business, in an instructional and marketing capacity. An avid volunteer, she has assisted numerous groups such as the Easter Seals of Alberta, Paralympic Sports Association and Junior Achievement of Northern Alberta.