What is the difference between a "business combination" and a "subsidiary"?
I am a CA student in canada, and the CICA Handbook have a article on business combinations, and another for subsidiaries.
Could someone please explain the difference for me?
Answers:
A business comb. is the process of bringing together different entitities. The process may or may not result in a parent-subsidiary relationship. Here's an extract from the IFRS 3 Business Combinations.
4 A business combination is the bringing together of separate entities or businesses into one reporting entity. The result of nearly adjectives business combinations is that one entity, the acquirer, obtain control of one or more other businesses, the acquiree. If an entity obtain control of one or more other entities that are not businesses, the bringing together of those entities is not a business combination. When an entity acquire a group of assets or lattice assets that does not constitute a business, it shall allocate the cost of the group between the individual identifiable assets and liability contained by the group base on their relative honourable values at the date of purchase.
5 A business combination may be structured in a mixture of ways for trial, taxation or other reason. It may involve the purchase by an entity of the equity of another entity, the purchase of adjectives the web assets of another entity, the assumption of the liability of another entity, or the purchase of some of the web assets of another entity that together form one or more businesses. It may be effect by the issue of equity instruments, the verbs of change, change equivalents or other assets, or a combination thereof. The transaction may be between the shareholders of the combining entities or between one entity and the shareholders of another entity. It may involve the establishment of a bright entity to control the combining entities or web assets transferred, or the restructuring of one or more of the combining entities.
6 A business combination may result in a parent-subsidiary relationship where the acquirer is the parent and the acquiree a subsidiary of the acquirer. In such circumstances, the acquirer applies this IFRS surrounded by its consolidated financial statements. It includes its interest in the acquiree in any separate financial statements it issues as an investment in a subsidiary (see IAS 27 Consolidated and Separate Financial Statements).
7 A business combination may involve the purchase of the network assets, including any goodwill, of another entity to some extent than the purchase of the equity of the other entity. Such a combination does not result in a parent-subsidiary relationship.
8 Included inwardly the definition of a business combination, and consequently the breadth of this IFRS, are business combinations where one entity obtain control of another entity but for which the date of obtain control (i.e. the acquirement date) does not coincide near the date or date of acquire an ownership interest (i.e. the date or date of exchange). This situation may arise, for example, when an investee enter into share buy-back arrangements beside some of its investors and, as a result, control of the investee change.
The US GAAP equivalent of the IFRS 3 is the SFAS 141.
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Could someone please explain the difference for me?
Answers:
A business comb. is the process of bringing together different entitities. The process may or may not result in a parent-subsidiary relationship. Here's an extract from the IFRS 3 Business Combinations.
4 A business combination is the bringing together of separate entities or businesses into one reporting entity. The result of nearly adjectives business combinations is that one entity, the acquirer, obtain control of one or more other businesses, the acquiree. If an entity obtain control of one or more other entities that are not businesses, the bringing together of those entities is not a business combination. When an entity acquire a group of assets or lattice assets that does not constitute a business, it shall allocate the cost of the group between the individual identifiable assets and liability contained by the group base on their relative honourable values at the date of purchase.
5 A business combination may be structured in a mixture of ways for trial, taxation or other reason. It may involve the purchase by an entity of the equity of another entity, the purchase of adjectives the web assets of another entity, the assumption of the liability of another entity, or the purchase of some of the web assets of another entity that together form one or more businesses. It may be effect by the issue of equity instruments, the verbs of change, change equivalents or other assets, or a combination thereof. The transaction may be between the shareholders of the combining entities or between one entity and the shareholders of another entity. It may involve the establishment of a bright entity to control the combining entities or web assets transferred, or the restructuring of one or more of the combining entities.
6 A business combination may result in a parent-subsidiary relationship where the acquirer is the parent and the acquiree a subsidiary of the acquirer. In such circumstances, the acquirer applies this IFRS surrounded by its consolidated financial statements. It includes its interest in the acquiree in any separate financial statements it issues as an investment in a subsidiary (see IAS 27 Consolidated and Separate Financial Statements).
7 A business combination may involve the purchase of the network assets, including any goodwill, of another entity to some extent than the purchase of the equity of the other entity. Such a combination does not result in a parent-subsidiary relationship.
8 Included inwardly the definition of a business combination, and consequently the breadth of this IFRS, are business combinations where one entity obtain control of another entity but for which the date of obtain control (i.e. the acquirement date) does not coincide near the date or date of acquire an ownership interest (i.e. the date or date of exchange). This situation may arise, for example, when an investee enter into share buy-back arrangements beside some of its investors and, as a result, control of the investee change.
The US GAAP equivalent of the IFRS 3 is the SFAS 141.