Accounting acquirer in a reverse acquisition

Learning objectives

• Identify the accounting acquirer and the accounting acquiree in a reverse acquisition, and the condition that the accounting acquiree be a business.L4

Normative references

• IFRS 3 §B19Reverse acquisition: the entity that issues the securities (the legal acquirer) is the acquiree for accounting purposes, and the entity whose securities are acquired (usually the legal subsidiary) is the accounting acquirer (B19 to B27). The accounting acquiree must be a business (criterion in B7) for the transaction to be a reverse acquisition within IFRS 3. Non-normative information (agenda decision of the IFRS Interpretations Committee, March 2013): if that entity is not a business, B19 to B27 are applied by analogy to identify the accounting acquirer, but the transaction is not a business combination: it falls within IFRS 2, and the difference between the fair value of the shares deemed issued and that of the identifiable net assets acquired pays for the listing service, recognised as an expense.

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

1 question

• Zeta SA, a listed company that runs a distribution business, issues shares to acquire 100% of the shares of Omega SA, which is unlisted. After the transaction, Omega's former shareholders hold 80% of the voting rights of Zeta and run its board. Write a short note concluding on the identification of the accounting acquirer, distinguishing facts of the case, rule and professional judgement.L4