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ISCA supports the Board’s initiative to address the diversity in practice for common control business combinations. However, we are concerned that the proposed criteria as set out in the DP for the use of acquisition or book value method might result in structuring opportunities for companies to achieve certain desired accounting outcomes.
In addition, we disagree with the Board’s views to include the transferred company from the combination date, without restating pre-combination information. This disregards the substance of the transaction (i.e., the “new” entity is in-substance a continuation of the transferred company) and results in loss of pre-combination information relating to the transferred company.
Lastly, for the book value method, the receiving company should measure the acquired assets and liabilities as reported by the controlling party and not that reported by the transferred company. This approach is recommended in our Recommended Accounting Practice 12 (RAP 12) Merger Accounting for Common Control Combinations for Financial Statements and deviates from the Board’s proposal in the DP.
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