IFRS 3 "Business Combinations" was issued by the IASB on March 31, 2004, replacing IAS 22 "Business Combinations". It achieves a high degree of convergence with US GAAP and requires identifiable assets to be recognized on the balance sheet of the acquiring entity. This is a significant change from most existing national accounting standards. The new standards also require greater transparency and a more detailed due diligence process. Goodwill and intangible assets with indefinite useful economic lives will need to be tested at least annually for impairment. Many companies will require independent specialist valuation assistance to withstand market scrutiny and satisfy the need for objectivity and auditor independence. The new requirements should be applied by quoted companies prospectively to business combinations entered into on or after March 31, 2004.
