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business combinations. It provides guidance on how to account for the acquisition of one entity by
another and establishes principles for recognizing and measuring the fair value of assets acquired and
liabilities assumed in a business combination.
Objective:
The main objective of PFRS 3 is to improve the relevance, reliability, and comparability of financial
statements by providing a framework for accounting for business combinations.
PFRS 3 defines a business combination as a transaction or event in which an acquirer obtains control
over one or more businesses.
The acquirer recognizes the identifiable assets acquired, liabilities assumed, and any non-controlling
interest in the acquiree at the acquisition date, which is the date when the acquirer obtains control.
PFRS 3 emphasizes the use of fair value in measuring the assets and liabilities acquired. This includes
tangible and intangible assets, as well as contingent consideration.
Goodwill:
Goodwill arises when the consideration transferred by the acquirer exceeds the fair value of the
identifiable net assets acquired. Goodwill is recognized as an asset and tested for impairment regularly.
Disclosure Requirements:
PFRS 3 requires comprehensive disclosures about the nature and financial effects of the business
combination. This includes information about the acquired entity, the cost of the combination, and the
goodwill recognized.
Transition Provisions:
PFRS 3 provides guidance on the accounting treatment for business combinations that occurred before
the effective date of the standard.