Business combination refers to the process by which two or more separate businesses come together to form a single entity. This can occur through various methods, such as mergers, acquisitions, consolidations, or other forms of corporate restructuring. When a business combination takes place, it has significant implications for financial reporting and accounting treatment.

In the context of business combinations, the following terminologies are being utilized:


    An investment in an associate is a situation where one company holds a significant but not a controlling stake in another company. The investing company has the ability to influence the financial and operational decisions of the associate, but it doesn’t have full control over its activities. Significant influence typically means owning between 20% and 50% of the voting shares of the associate company.

    Example: Company A holds a 40% stake in Company B. While Company A does not have full control over Company B, it has significant influence over its decisions. Company A accounts for this investment using the equity method, reflecting its share of Company B’s profits and losses on its own financial statements.


    Goodwill is an intangible asset that arises when one company acquires another company and pays more than the fair value of the acquired company’s net assets. It represents the value of the acquired company’s reputation, customer relationships, brand, and other intangible factors that contribute to its market value.

    Example: Company X acquires Company Y for N10 million. The fair value of Company Y’s net assets (tangible assets minus liabilities) is $8 million. The N2 million difference between the purchase price and the net assets’ fair value is considered goodwill. This amount represents the value of Company Y’s established customer base, brand recognition, and other intangible assets.


    Non-controlling interest, also known as minority interest, refers to the portion of a subsidiary’s equity that is not owned by the parent company. When a company acquires another and doesn’t own 100% of it, the ownership held by external parties is considered non-controlling interest.

    Example: Company E acquires 80% of Company F. The remaining 20% is owned by external shareholders. Company E consolidates the financial statements of Company F but reports the NCI of 20% separately on its own consolidated financial statements.


    Piecemeal acquisition also referred to as step acquisition, is when an investor acquires or gains control interest in a company, in stages. This approach allows the acquiring company to selectively purchase only the assets or business units that align with its strategic goals, rather than taking on the entire entity.

    Example: Company M is interested in expanding its product line into the electronics market. Instead of acquiring the entire electronics company, it purchases only the research and development division of that company to gain access to their technology and expertise.


Group financial statements, also known as consolidated financial statements, are a set of financial reports that present the combined financial information of a parent company and its subsidiaries as a single entity.

  1. IFRS 10- Consolidated Financial Statements: The standards for the preparation and presentation of consolidated financial statements are outlined in IFRS 10 Consolidated Financial Statements, which oblige businesses to consolidate entities they control.
  2. IFRS 3-Business combination: This standard aims to improve the information supplied concerning company combinations and their impacts by making it more relevant, reliable, and comparable. It lays out guidelines for identifying and valuing assets and liabilities.
  3. IFRS 11- Joint arrangements: IFRS 11 establishes principles for financial reporting by entities that have an interest in arrangements that are controlled jointly (joint arrangements). An agreement that two or more parties jointly control is referred to as a joint arrangement.
  4. IFRS 12-Disclosure of interest in other entities: This standard sets out that an entity is required to disclose information that enables users of its financial statements to evaluate the nature & risks associated with its interest in other entities and the effects of those cash flows on its financial position, performance and cash flows.
  5. IAS 28- Investments in Associate: Its aim is to specify the accounting for investments in associates and lay out the conditions for applying the equity method for accounting for investments in associates and joint ventures.

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