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The business combinations guidance states that for a business combination to occur, an acquirer must obtain control over a business. US GAAP and IFRS define control differently. Consequently, the same transaction may be accounted for as a business combination under US GAAP, but not under IFRS, or vice versa. The table below highlights various considerations in determining control under US GAAP and IFRS.
US GAAP
IFRS
Consolidation decisions are evaluated first under the variable interest entity model.
  • Qualitatively assess if the variable interest meets both criteria:
    • Power to direct activities that most significantly impact economic performance
    • Potential to receive significant benefits or absorb significant losses
All other entities are evaluated under the voting interest model.
See SD 12 for further information on the concept of control and the consolidation model under US GAAP.
An investor has control over an investee when all of the following elements are present:
  • Power over the investee
  • Exposure, or rights, to variable returns from its involvement with the investee
  • Ability to use power to affect the returns
See SD 12 for further information on the concept of control and the consolidation model under IFRS.

PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

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