BUSINESS COMBINATION

-the term applied to external expansion in which separate enterprises are brought together in one
economic entity as a result of one enterprise obtaining control over the net assets and operations of
another enterprise.
- IFRS 3- defines the business combination as a transaction or other event in which an acquirer obtains
control of one or more businesses. (acquiree). one of the combining entities shall be consider as the
acquirer.
Business is defined in the standard as integrated set of activities and asset that is capable of being
conducted and manage for the purpose of providing a return in the form of dividends, lower cost or other
economic benefits directly to investors or other owners, member in particular.
3 ELEMENTS of a Business
Input- is an economic resource that has the ability to create outputs when one or more process is put into
it.
Process- any system, standard, protocol, convention or rule that when applied into input creates an
output.
Output- the result of inputs and process that will provide a return in the form of dividends, etc.…
Example:

 Input is the raw materials then the process is them turning into a finish product that will give an
output which are the sales made from the raw materials.
 Input is the fund, Process is the circulation of funds, Output is the Income.
TYPES OF BUSINESS COMBINATION ACCORDING TO BUSINESS P.O.V
1. Horizontal Combination
- Same business industry or business producing the same product joined together
2. Vertical Combination
- Large industrial unit combine together under one management.
- Example: when a food corporation became their own supplier
3. Conglomerate Combination
- is a merger between firms that are involved in totally unrelated business activities.
- Example: when a food and beverage company merge with an appliance company.
4. Circular Combination
- to combination of firms engaged in different businesses and producing different products.
LEGAL P.O.V
1. Statutory Merger -This kind of business consolidation takes place when an acquiring company
liquidates the assets of a company it buys. The acquiring company keeps its operations going,
while the acquired entity no longer exists.
2. Statutory Consolidation- businesses are combined into a new entity, the original companies
cease to exist. By combining these businesses together, they create a new, larger corporation.