What is Step Acquisition?
A step acquisition occurs when an acquirer obtains control of a business in stages, starting from an equity interest held before the acquisition. Under IFRS 3, the previously held interest is remeasured to fair value at the acquisition date, with any resulting gain or loss recognized in profit or loss.
How It Works
- Account for the original investment under IAS 28 (associate) or IFRS 9 (financial asset).
- On gaining control, remeasure the previously held interest to fair value.
- Recognize the remeasurement gain or loss in profit or loss.
- Apply IFRS 3 acquisition accounting from that date forward.
Saudi Context
Saudi private equity investors that gradually increase stakes in target companies before fully acquiring them apply step acquisition accounting on the date they cross the control threshold.
Example
An investor held 30 percent of a target at fair value of SAR 100 million. On buying another 30 percent and gaining control, the original 30 percent is remeasured to SAR 130 million, generating a SAR 30 million gain.