IPSASB publishes exposure draft on public sector combinations

Exposure Draft (ED) 60 classified public sector combinations as either amalgamations or acquisitions taking into account control and other factors.

"A party to the combination must gain control over an operation for it to be treated as an acquisition rather than an amalgamation, but control is not sufficient in itself to determine that a combination is an acquisition."

According to the ED, the gaining of control over an operation creates a rebuttable presumption that the combination is an acquisition.

"If the acquisition presumption is rebutted, then the transaction is treated as an amalgamation."

The IPSASB themselves noted that the classification proposed within the ED is different to the stance taken in previous years, and serves as a response to concerns raised by stakeholders.

"For recognition and measurement of amalgamations, ED 60 proposes use of the 'modified pooling of interests' method of accounting. This method, also referred to as 'merger accounting', recognises the amalgamation on the date it takes place. For acquisitions, ED 60 proposes use of the 'acquisition' method of accounting, applying the same approach as in IFRS 3, Business Combinations. This is supplemented with guidance for public sector-specific situations."

"Public sector combinations have been a very challenging project for our board," said IPSASB chair Ian Carruthers.

"Addressing this concern by identifying the factors that distinguish an amalgamation from an acquisition has proved difficult. However I believe we have now achieved this."