What is Business Combination?
A business combination is a transaction in which an acquirer obtains control of one or more businesses. Under IFRS 3, the acquirer applies the acquisition method: identify the acquirer, determine the acquisition date, measure identifiable assets and liabilities at fair value, and recognize goodwill or a bargain purchase gain.
How It Works
- Identify the acquirer and the acquisition date.
- Measure the consideration transferred at fair value.
- Recognize identifiable assets and liabilities at fair value.
- Recognize goodwill as the residual (or a bargain purchase gain if the residual is negative).
Saudi Context
Saudi M&A activity, especially in retail, healthcare and tech sectors, requires acquirers to apply IFRS 3 and disclose detailed acquisition accounting.
Example
An acquirer pays SAR 500 million for a target with identifiable net assets of SAR 400 million at fair value. The SAR 100 million difference is recognized as goodwill.