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The optional concentration test

Learning objectives

Determine, from the fair values in a case, whether the concentration test is met (substantially all of the fair value of the gross assets concentrated in a single identifiable asset or group of similar identifiable assets).L1, L2, L3
Explain that the test is optional, applied on a transaction-by-transaction basis, and that when the test is met the set is determined not to be a business.L1, L2, L3

IFRS 3 §B7AOptional concentration test: the entity may elect, on a transaction-by-transaction basis, to apply a simplified test. If the test is met, the set is not a business and no further assessment is needed; if it is not met, or if the entity elects not to apply it, the entity performs the assessment in paras. B8 to B12D.
IFRS 3 §B7BThe concentration test is met (so the set is not a business) if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. Gross assets exclude cash and cash equivalents, deferred tax assets and goodwill resulting from the effects of deferred tax liabilities; tangible assets that cannot be separated (for example land and the building on it) are treated as a single asset; assets of different classes or with significantly different risk characteristics are not similar. The Standard does not quantify "substantially all": no percentage is taught as a rule.

Original summaries of the paragraphs (reference register), never a quotation of the standard.