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Desk-top review on companies’ business combinations disclosures

IAASA, Ireland’s accounting enforcer, finds that many companies fail to provide complete information on their acquisitions in the annual accounts.

IAASA has today published the results of a desk-top review into the business combinations disclosures that companies included in their 2017/18 annual accounts. The review covered the annual accounts of thirty-one companies listed on Euronext Dublin (Irish Stock Exchange).

The document is available here.


Accounting standards (IFRS 3 Business Combinations) establishes the principles and requirements for how an acquiring company in a business acquisition or a business combination:

  1. recognises and measures in its annual accounts the identifiable assets and liabilities acquired, and any interest in the acquiree held by other parties;

  1. recognises and measures the goodwill acquired in the business combination; and

  1. determines what information to disclose to enable the users of the annual accounts to evaluate the nature and financial effects of the business combination.

Key findings

IAASA’s desk-top review identified that:

  1. 14 (2016/17: 14) companies had acquisition activity during their most recent reporting year. The remaining 17 companies had no acquisitions;

  1. the total consideration paid by the companies for acquisitions amounted to €4.8bn (2016/17: €5.7bn);

  1. following the acquisitions, companies recognised goodwill amounting to €1.9bn (2016/17:€4.7bn) equating to 43% (2016/17: 82%) of the total consideration paid;

  1. 10 of the 14 (71%) companies disclosed that the amounts recognised in the annual accounts for completed business combinations had been determined provisionally. These 10 companies did not disclose the assets, liabilities, equity interests or items of consideration for which the initial accounting had not been finalised;

  1. 6 of the 14 (43%) companies did not disclose the estimate at the acquisition date of the contractual cash flows for acquired receivables that is not expected to be collected;

  1. 6 of 14 (43%) companies did not disclose the amount of acquisition-related costs following the completion of their respective business combinations;

  1. 5 of the 14 (36%) companies did not disclose the basis for determining the amount of the contingent consideration payment; and

  1. 4 of the 14 (29%) companies did not disclose the valuation techniques and the key valuation model inputs used to measure the contingent consideration in the annual accounts.

Set out below is a chart of the key findings which illustrates the number of issuers that did not disclose the required information (red) compared to the issuers who did disclose the required information (green):

Enforcement responses

IAASA will continue to focus on this topic in its 2019 cycle of examinations and will engage with company directors in relation to business combination disclosures.

It is IAASA’s expectation that Boards and Audit Committees will continue to carefully assess and consider the disclosure requirements of IFRS 3 Business Combinations and ensure that all relevant information is disclosed in annual accounts.