This free, guided checker walks your finance team through the key decision points for IFRS 10 Step Acquisition to Control. Answer a few questions to see the likely treatment and the evidence to document.
Answer a few quick questions below. It is private - nothing is submitted or stored - and takes about a minute.
This tool is a high-level IFRS screening aid for general information only and is not accounting, audit or legal advice. Conclusions require entity-specific evidence and judgement - confirm the treatment with your advisor.
Here is what the checker asks and why each step matters. Prefer to talk it through? Contact us and we will help directly.
IFRS 3.41 to 3.42 govern a business combination achieved in stages, where control is obtained after the acquirer already held an equity interest. Test by asking whether an associate, joint venture, or IFRS 9 financial asset in the investee existed immediately before the transaction that conferred control. The common trap is treating a step acquisition as a fresh single-stage combination and failing to remeasure the previously held interest to fair value.
Apply the acquisition method to a single-stage business combination if control was obtained, with no previously held interest to remeasure (IFRS 3.4; IFRS 3.5).
Official guidance: IFRS issued standards
IFRS 10.7 defines control as power over the relevant activities, exposure to variable returns, and the ability to use that power to affect those returns, all three present together. Run the test against the latest transaction by assessing voting rights, potential voting rights, board composition, and contractual rights (IFRS 10.B38 to B50). The common trap is assuming a majority equity stake automatically gives control when governance or contractual terms withhold the ability to direct the relevant activities.
Continue accounting for the existing interest under IAS 28, IFRS 9, or IFRS 11 until control is obtained (IFRS 10.7).
Official guidance: IFRS issued standards
IFRS 3.8 fixes the acquisition date as the date the acquirer obtains control, generally the closing date but potentially earlier or later depending on the agreement (IFRS 3.9). Run the test by identifying when the present ability to direct the relevant activities actually passed, considering escrow, conditions, and control-transfer clauses. The common trap is defaulting to the legal completion date when control passed on a different date, which mis-dates the fair value measurement of the prior interest and the consideration.
Establish the acquisition date when control actually passed before remeasuring the previously held interest (IFRS 3.8; IFRS 3.9).
Official guidance: IFRS issued standards
The measurement basis applied to the previously held interest before control determines the carrying amount to derecognise and how prior OCI is dealt with on remeasurement (IFRS 3.42). Identify whether the interest was equity accounted under IAS 28, or held at fair value through profit or loss or through OCI under IFRS 9. The common trap is recycling the cumulative OCI of an IFRS 9 equity investment measured at FVOCI to profit or loss, which IFRS 9.B5.7.1 prohibits.
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Official guidance: IFRS issued standards
IFRS 3.41 requires the previously held interest to be remeasured to acquisition-date fair value, with the resulting gain or loss recognised in profit or loss. Amounts previously recognised in OCI are dealt with on the same basis as a direct disposal of the interest (IFRS 3.42), which for IFRS 9 equity investments at FVOCI means they are not recycled to profit or loss. Measure fair value on a market participant basis rather than using the negotiated price paid for the controlling stake.
Remeasure the previously held interest to acquisition-date fair value before calculating goodwill (IFRS 3.41).
Official guidance: IFRS issued standards
The remeasurement gain or loss on the previously held interest is recognised in profit or loss (IFRS 3.42). Amounts previously recognised in OCI are treated on the same basis as if the interest had been disposed of directly: cumulative OCI on an IFRS 9 equity investment measured at FVOCI is not recycled to profit or loss and is transferred within equity, whereas the share of an associate's OCI under the equity method is reclassified as IAS 28 would require on disposal. The common trap is recycling FVOCI equity gains to profit or loss when IFRS 9 prohibits it.
Recognise the remeasurement gain or loss in profit or loss and deal with prior OCI on the disposal basis (IFRS 3.42).
Official guidance: IFRS issued standards
IFRS 3.32 builds goodwill from consideration transferred at fair value (IFRS 3.37), plus NCI, plus the acquisition-date fair value of the previously held interest, less net identifiable assets. Run the test by confirming all three credit components are measured at fair value on the same acquisition date and aggregated. The common trap is folding acquisition-related costs into consideration when IFRS 3.53 requires them expensed, or omitting the remeasured prior interest from the aggregate.
Aggregate consideration transferred, the remeasured prior interest, and NCI before the purchase price allocation (IFRS 3.32; IFRS 3.37).
Official guidance: IFRS issued standards
IFRS 3.18 requires identifiable assets acquired and liabilities assumed to be recognised separately at acquisition-date fair value, applying the recognition principle even to items the acquiree never recorded. Test by working through separable and contractual-legal intangibles, contingent liabilities that are present obligations (IFRS 3.21 to 3.23), and deferred tax on the fair value differences (IFRS 3.24). The common trap is carrying forward the acquiree's book values instead of stepping up to fair value.
Complete the purchase price allocation at fair value before recognising goodwill or a bargain purchase (IFRS 3.18).
Official guidance: IFRS issued standards
IFRS 3.32(a) recognises goodwill when consideration transferred plus NCI plus the fair value of the previously held interest exceeds the net identifiable assets acquired. Run the test by completing the goodwill bridge and checking the sign of the residual before concluding. The common trap is treating a negative residual as goodwill rather than moving to the bargain purchase reassessment required by IFRS 3.34 and 3.36.
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Official guidance: IFRS issued standards
IFRS 3.34 recognises a bargain purchase gain only when net identifiable assets exceed the aggregate of consideration, NCI, and the previously held interest, and IFRS 3.36 requires a reassessment first. Run the test by rechecking the identification and fair values of assets, liabilities, and each consideration component before booking any gain in profit or loss. The common trap is recognising a bargain purchase gain that is really an arithmetic error in the purchase price allocation or an unrecognised liability.
Reconcile the purchase price allocation arithmetic before finalising goodwill or a bargain purchase (IFRS 3.32).
Official guidance: IFRS issued standards
IFRS 10.20 and B88 require the acquirer to consolidate the subsidiary from the date control is obtained, eliminating the parent's investment (the remeasured prior interest plus new consideration) against the acquiree's equity (IFRS 10.B86). Run the test by confirming the subsidiary's income and expenses enter the group accounts only from the acquisition date and that NCI and goodwill are recognised. The common trap is leaving the previously held interest on the balance sheet alongside the new consideration instead of eliminating it in consolidation.
Post consolidation entries from the acquisition date before issuing the group financial statements (IFRS 10.20; IFRS 10.B88).
Official guidance: IFRS issued standards
The completed step acquisition resolves to either goodwill (IFRS 3.32) or a bargain purchase gain (IFRS 3.34), each with distinct recognition and disclosure. Select the outcome by reference to the sign of the goodwill bridge after the IFRS 3.36 reassessment. Disclose that the combination was achieved in stages, the acquisition-date fair value of the previously held interest, and the remeasurement gain or loss recognised in profit or loss (IFRS 3.B64(p)).
Recognise goodwill and consolidate from the acquisition date with full IFRS 3 and IFRS 12 disclosures (IFRS 3.32; IFRS 3.B64). Recognise the bargain purchase gain after the IFRS 3.36 reassessment and consolidate from the acquisition date (IFRS 3.34; IFRS 3.36).
Official guidance: IFRS issued standards
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