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This would ensure flexibility in applying the IFRS 3 requirements also stakeholders can exercise their professional judgement in more complex circumstances.
Overall, the proposed amendments to IFRS 3 are an improvement compared to existing guidance. The proposals are expected to address most of current issues.
FEE has identified some areas where the guidance would benefit from a better balance between a rule based and a principle based approach related to the ‘screening test’ and the existence of an organised workforce when no output exists.
This would allow stakeholders to exercise their professional judgement in the more complex circumstances, which would enhance the relevance of the financial statements.
While FEE agrees that the acquisition of an organised workforce to perform an acquired substantive process is a key factor in assessing whether an acquired set constitutes a business, FEE recommends the IASB to clarify the notion of work force, as it is not clear whether the IASB is referring to the criticality of a specific work force (not replaceable) or to the functionality of the work force (replaceable). Also, it is not clear how the existence of an organized work force, which is considered to be an input by the IASB, can allow to meet the “substantive process” criteria to conclude that it is a business when there is no output.
As FEE finds the global character of IFRS is responsible for improving the quality, comparability and reliability of financial information, FEE encourages the efforts made by the IASB and the FASB to develop a fairly similar and consistent model for the definition of a business. FEE urges both the IASB and the FASB to continue their close collaboration in finalising their projects to eliminate any differences as much as possible.