creating outputs from the assets (that is, the risk characteristics). [IFRS 3.B7B].

The following are not considered similar assets:

• a tangible asset and an intangible asset;
• tangible assets in different classes (e.g. inventory, manufacturing equipment and
automobiles) unless they are considered a single identifiable asset in circumstances
described above;
• identifiable intangible assets in different classes (e.g. brand names, licences and
intangible assets under development);
• a financial asset and a non-financial asset;
• financial assets in different classes (e.g. accounts receivable and investments in
equity instruments); and
• identifiable assets that are within the same class of asset but have significantly
different risk characteristics. [IFRS 3.B7B].
If the concentration test is met, the set of activities and assets is determined not to
be a business and no further assessment is needed. If the concentration test is not
met, or if an entity elects not to apply the concentration test, a detailed assessment
must be performed applying the normal requirements in IFRS 3. As such, the
concentration test never determines that a transaction is a business combination.
[IFRS 3.B7A, BC21Y].
The IASB also provided a series of illustrative examples to assist in applying the
guidance in IFRS 3 on the definition of business. These illustrative examples accompany
the standard and address, among other things, the application of the optional
concentration test and the assessment whether an acquired process is substantive.
One of the illustrative examples demonstrates the application of optional concentration
test in the acquisition of real estate. It describes an entity that purchases a portfolio of 10
single-family homes that each have an in-place lease. The fair value of the consideration
paid is equal to the aggregate zero balance) in the combining process? Branch Income or Loss
Purchases Sent to Branch a) Yes Yes b) No Yes c) No No d) Yes No 25. In the year end
general ledger closing procedures, which accounts are closed in arriving at Cost of Sales?
Purchases Sent to Branch Purchases from Home Office a) Yes Yes b) No Yes c) No No d) Yes
No 26. The general ledger entry to adjust the Intracompany Profit Deferred account at the end
of an accounting period a) Is reversed in the following accounting period b) Is reversed in the
combining process c) Results in an entry in the combining process that is essentially a
reclassification entry d) Results in the Intracompany Profit Deferred account being reduced to a
zero balance in the combined column of the combining statement worksheetfair value of the 10
single-family homes acquired. Each
single-family home includes the land, building and property improvements. Each home
has a different floor area and interior design. The 10 single-family homes are located in
the same area and the classes of customers (e.g. tenants) are similar. The risks associated
with operating in the real estate market of the homes acquired are not significantly
different. No employees, other assets, processes or other activities are transferred.
[IFRS 3.IE74].
After electing and applying the optional conc