IFRS 3 - Definition of a Business

Yes. The changes narrow the definition by:

• focusing on providing goods and services to customers
• removing the emphasis from providing a return to shareholders
• removing the reference to ‘lower costs or other economics benefits’.

The new definition now reads:

‘An integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing goods or services to customers, generating investment income (such as dividends or interest) or generating other income from ordinary activities.’

Five steps to determining a business

The below steps and considerations are described in the amended Standard to determine if the acquired set of activities and assets is a business:

Step 1 - Consider whether to apply the concentration test

Step 2 - Consider what assets have been acquired

Step 3 - Consider how the fair value of gross assets acquired is concentrated

Step 4 - Consider whether the acquired set of activities and assets has outputs

Step 5 - Consider if the acquired process is substantive

Download the full article 'Insights into IFRS - Definition of a Business [ 112 kb ]' for further details into:

• What is the optional concentration test?
• Calculation of the concentration test
• What are the minimum requirements to meet the definition of a business?
• Is the acquired process substantive?
• Transition details
• Examples in practice.