Business Combination Notes (English Version)
Business Combination Notes
March 5, 2026
Advantages of Business Combination
● Potential Growth
The company is expected to grow because it acquires or merges with another company
that already has a good reputation.
● Cost Efficiency
Costs are reduced since the acquired company is already established. The acquiring
company no longer needs to start from scratch.
● Elimination of Competition
Competitors are reduced because the company acquires or merges with them.
● Large-Scale Production
The facilities of the acquired company help increase production capacity and improve
efficiency.
● Synergy
Companies become more effective by working together through integration or merger.
● Tax Advantage
Business combinations may reduce taxes through deductions, utilization of losses, or tax
incentives.
Point of View: Company
● Horizontal Combination
The acquired company operates in the same type of business.
● Vertical Combination
The companies are in the same industry but different stages of production.
Example: A manufacturing company acquires its supplier.
● Conglomerate Combination
The companies involved are in completely different industries.
Point of View: Legal
● Statutory Merger
A + B = A or B
One company survives, depending on which entity has control.
● Statutory Consolidation
A + B = C
A new company is formed after combining both entities.
Point of View: Accounting
● Acquisition of Net Assets
The acquired company is dissolved. The acquiring company takes control of assets and
assumes liabilities.
● Acquisition of Stock
Control is obtained by purchasing shares, but the acquired company continues to exist.
Example: A + B = A + B
PFRS 3
This standard was created to make financial reporting for business combinations uniform.
It improves:
● Transparency
● Reliability
● Comparability of financial statements
Out of Scope of PFRS 3
● Joint ventures or joint arrangements
● Acquisition of net assets that do not constitute a business
(This refers to purchasing assets that do not form a complete business operation.)
Common Control
Example:
Parent Company
/ \
Sub1 Sub2
● Subsidiaries under the same parent cannot be treated as a business combination.
Definition of a Business
● Input
Resources used by the company (e.g., buildings, equipment, materials)
● Process
Systems, procedures, or protocols that transform inputs
● Output
Results such as income or revenue from operations
Control
Control is required for one company to take over another.
How to Obtain Control:
●
●
●
●
Transfer of cash, cash equivalents, or other assets
Incurring liabilities (buy now, pay later)
Issuing equity securities
Providing multiple types of consideration
Acquisition Method Key Concepts
● Acquisition Date
The date when control is obtained
● Perspective of the Acquirer
Financial statements are prepared from the viewpoint of the acquiring company
● Fair Value
Assets and liabilities are measured at their fair value at the acquisition date
0
