IFRS 3 Business Combinations requires the identifiable assets acquired and liabilities assumed to be measured at their acquisition-date fair value (with only a few exception). This may result in upward adjustments to the carrying amounts in the acquiree’s financial statements. These adjustments are commonly referred to as ‘step-ups’.

When some of these assets, such as inventory, are subsequently sold, the reversal of the step-ups in included in the cost of goods sold. Some users claim that this may impair their ability to use the Group post-combination financial statements to predict the ongoing contributions of the acquired business. So information about the impact of the reversal of the step-ups may be relevant.

This Short Discussion Series paper analyses when the information would be relevant and how an entity could provide it by using presentation on statement of comprehensive income or disclosures in the notes. It also discusses practical issues about producing the information.


Short Discussion Series – Presentation of the reversal of acquisition step-ups