The Interpretations Committee of the International Accounting Standards Board (IASB) has published a tentative agenda decision on an inquiry into the accounting approach of a merger of a parent company with its subsidiary. SOCPA, represented by the Accounting Standards Council, agrees that the parent entity controlled the subsidiary before the merger and, consequently, the merger is not a business combination in accordance with IFRS 3. Therefore, IFRS 3 should not be applied. Instead, a parent entity—in its separate financial statements should recognize the assets and liabilities of the subsidiary at their previously recognized carrying amounts.
SOCPA, however, urges the IASB to add this fact pattern to the project on Business Combinations under Common Control in order to provide specific guidance for preparers in the future.