1. Step 1: Identifying the Acquirer
For every business combination, one of the combining entities must be identified as the acquirer. This is the entity that obtains control of the acquiree. Under IFRS 10 and ASC 810 (Consolidation), control exists when an investor has power over the investee, exposure or rights to variable returns from its involvement, and the ability to use its power over the investee to affect the amount of the investor’s returns.
2. Indicators of Control (Beyond Majority Equity Shareholding)
When a clear voting majority does not exist, look to other qualitative and contractual indicators to identify the acquirer:
- The combining entity whose management dominates the appointment of the new combined senior management team.
- The combining entity whose owners retain or receive the largest portion of the voting rights in the combined entity.
- The combining entity that pays a significant premium over the pre-combination fair value of the equity interests of the other combining entities.
3. Step 2: Determining the Acquisition Date
The acquisition date is the date on which the acquirer formally obtains control of the acquiree. This is typically the closing date on which the acquirer legally transfers the consideration, acquires the assets, and assumes the liabilities of the acquiree.
It can occasionally occur before or after the closing date if a written agreement provides that the acquirer obtains control ahead of the physical transaction window.
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