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Exposure Draft – Business Combinations (Part 1)

Proposed Disclosure Amendments For Material Business Combinations
Patricia Tan Mui Siang
Koh Wei Chern
BY Patricia Tan Mui Siang and Koh Wei Chern

In the post‑implementation review of International Financial Reporting Standard (IFRS) 3 Business Combinations, stakeholders raised concerns that investors are not receiving sufficient information about the business combinations1. As investors need additional information to help them better understand the rationale of the acquisition, the International Accounting Standards Board (IASB) recognises the inadequate business combination disclosure requirements. On 14 March 2024, the IASB issued an Exposure Draft Business Combinations – Disclosures, Goodwill and Impairment: Proposed amendments to IFRS 3 and IAS 36 (ED), for both material business combinations and strategic business combinations, a subset of material business combinations.

In this article, we discuss the proposed additional disclosure requirements for material business combinations by examining some examples of disclosures provided by publicly listed firms in Singapore under the current IFRS 3 disclosure requirements2.


The current IFRS 3 Appendix B Application Guidance specifies a long list of disclosure requirements concerning acquisitions (see IFRS 3 Appendix B Application Guidance paragraphs B64 (a) to (q)). One criticism raised during the post-implementation review of IFRS 3 was that entities refer to the above list as a checklist and frequently provide “boilerplate” disclosures.

In line with its principles-based approach, the IASB proposes that the standard specifies disclosure objectives to help “preparers to understand better why users need a particular item of information and help entities disclose information that better meets the needs of users”3.The disclosure objectives will likely move preparers away from a “checklist” mentality towards providing helpful information for users. The disclosure objectives proposed in the ED are that disclosures are to enable users to evaluate “(a) the benefits an entity expects from a business combination when agreeing on the price to acquire a business; and (b) for a strategic business combination, the extent to which the benefits an entity expects from the business combination are being obtained4”.

Specifically, for all material business combinations, the following amendments to disclosures are proposed:

(i) Currently, IFRS 3 paragraph B64(d) requires disclosure of the “primary reasons” for the business combination. The ED proposes using the phrase “strategic rationale” to replace “primary reasons”. ED Appendix A defines strategic rationale as an “entity’s reason(s) for entering into a business combination that is aligned with the entity’s overall business strategy”.

In 2018, BRC Asia Limited (BRC), a company that focuses on “prefabrication of steel reinforcement for use in concrete, trading of steel reinforcing bars, and manufacturing and sale of wire mesh fences”, acquired Lee Metal Group Ltd. BRC disclosed that the “Company acquired 100% equity interest of Lee Metal Group Ltd (Lee Metal Group), a manufacturer of prefabrication, manufacturing and sale, and trading of steel products in Singapore. Upon the acquisition, Lee Metal Group became a subsidiary of the Group. The Group acquired Lee Metal Group in order to strengthen its position as a leader of prefabrication, manufacturing and sale, and trading of steel products in Singapore. The acquisition is expected to reduce costs through economies of scale in the long run” (BRC Asia Limited 2018 Annual Report5).

In 2019, in another example, Keppel Corporation (Keppel) through its subsidiary, Konnectivity Pte Ltd, acquired M1 Limited (M1). Keppel disclosed that the “acquisition seeks to drive the business transformation in M1 to enable it to compete effectively. The acquisition will also complement the (Keppel) Group’s mission as a solutions provider for sustainable urbanisation, which includes connectivity. M1 can serve as a digital and connectivity platform to complement and augment the Group’s current suite of solutions” (Keppel Corporation 2019 Annual Report6).

Even though not explicitly stated in the current IFRS 3, some listed companies, such as BRC and Keppel, already explain the strategic rationale behind their acquisitions (see the underlined portions above). The proposed amendment helps ensure that entities explain the strategic rationale behind their acquisition and reinforce the disclosure objective as stated in the ED paragraph 62A(a).

(ii) Currently, IFRS 3 paragraph B64(e) only requires qualitative disclosure of the factors that make up the goodwill recognised, such as expected synergies. The proposed amendment requires additional qualitative and quantitative disclosures by inserting paragraph B64(ea), that is, firstly, disclosing the expected synergies by categories such as revenue synergies and cost synergies; and secondly, for each category, to disclose the estimated amount of the synergies, the estimated cost to achieve the synergies, and when the synergies are expected to start and how long they are expected to last.

BRC disclosed for its acquisition of Lee Metal Group in 2018 that the “goodwill of $55,000 comprises the value of strengthening the Group’s market position and cost-reduction synergies expected to arise from the acquisition and is allocated entirely to the prefabrication and manufacturing segment”.

Keppel disclosed for its acquisition of M1 Limited in 2019 that the “goodwill of $988,288,000 arising from the acquisition during the year was attributable to M1 Limited arising from the synergies that are expected to be harnessed as a multi-business group”.

It is observed that these are relatively generic disclosures. Brief and generic disclosures on synergy that make up goodwill have been typically observed in a 2021 study on business combinations in the healthcare industry in Singapore7. Unsurprisingly, many respondents to a June 2023 International Organizations of Securities Commissions (IOSCO) Consultation Feedback from Stakeholders also indicated that the current disclosure of the factors that make up the goodwill needs improvement8.

The proposed amendment responds to the call that indicated a lack of disclosures on synergies that make up goodwill arising from acquisition. For example, BRC would have to elaborate on the cost-reduction synergies, such as the amount of cost reduction, when the cost reduction would start materialising, and how long this would last. Keppel would have to specify clearly the categories of synergies that are expected to be harnessed. This proposed amendment also reinforces the disclosure objective stated in the proposed amendment to IFRS 3 paragraph 62A(a).

Nevertheless, the standard setters are mindful of the commercial sensitivity of the information required by this amendment. An acquirer could be exempt from such disclosure, “if doing so can be expected to seriously prejudice the achievement of any of the acquirer’s acquisition-date key objectives for the business combination”.

(iii) We briefly mention three other proposed amendments for material business combinations. First, IFRS 18 Presentation and Disclosure in Financial Statements was issued in April 2024, and will be effective on 1 January 2027. The term “profit or loss” in paragraph B64(q) has been replaced by “operating profit or loss”, as defined in IFRS 18. Second, the word “major” would be removed from paragraph B64(i) to improve the information entities disclose about pension and financing liabilities assumed in a business combination. Third, there are some proposed deletion of disclosure requirements within paragraph B64 to reduce volume and cost of compliance.


We discuss the proposed amendments to disclosures required for material business combinations under IFRS 3 Business Combinations. We present disclosures from two publicly listed firms on their material business combinations under the current IFRS 3 and illustrate how the proposed amendments will reduce the gap. If implemented and adequately adhered to, the proposed disclosures in the ED will likely reduce the gap in the current information environment relating to material business combinations. The IASB is inviting feedback on these proposals. The comment period for the ED is open until 15 July 2024.

Look out for our next article, to be published next week, which discusses the proposed disclosure amendments for strategic business combinations.

Patricia Tan Mui Siang is Associate Professor of Accounting, Nanyang Business School, Nanyang Technological University, and Koh Wei Chern is Associate Professor, Accountancy Programme, School of Business, Singapore University of Social Sciences.

1 Exposure Draft (ED): Basis for Conclusions on Business Combinations – Disclosures, Goodwill and Impairment: Proposed amendments to IFRS 3 and IAS 36, March 2024, paragraph BC18.

2 The proposed additional disclosure requirements for strategic business combinations are discussed in a separate article, to be published in the second week of June 2024.

3 ED: Basis for Conclusions on Business Combinations – Disclosures, Goodwill and Impairment Proposed amendments to IFRS 3 and IAS 36, March 2024, paragraph BC24.

4 ED, Business Combinations – Disclosures, Goodwill and Impairment Proposed amendments to IFRS 3 and IAS 36, March 2024, p.16, paragraph 62A.



7 Tan, P and Koh, W. C. “Purchase Price Allocation arising From M&A”, Institute of Singapore Chartered Accountants (ISCA) Journal, August 2021.

8 Recommendations on Accounting for Goodwill, IOSCO, Dec 2023, p.15.

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