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Business Combinations under Common Control

About the project

HKFRS/IFRS Standards do not specify how to account for combinations of companies or businesses controlled by the same party (BCUCC). Consequently, companies account for such transactions in different ways, making it difficult for investors and regulators to compare the financial effects of those transactions.


The International Accounting Standards Board (IASB) is discussing how to improve the quality of information, comparability and transparency of BCUCC to help investors make better investment decisions. As a next step, the IASB expects to publish a discussion paper in the first half of 2020.


HKICPA undertook various activities to drive global discussions on BCUCC and provide input to the IASB:


  • As the leader of the BCUCC working group of the Asian-Oceanian Standard-Setters Group, HKICPA has facilitated several discussions among accounting standard-setters within the region.
  • HKICPA works with other standard-setters, like the Italian Accounting Standard-Setter, to obtain investors' feedback and present the findings at international conferences.
  • Back at home, HKICPA conducted a study to understand the types of BCUCC and the published accounting information about BCUCC; raised awareness on the accounting situation with Hong Kong preparers and investors; and led discussions with local stakeholders to understand their information needs and accounting challenges related to BCUCC. 
  • In 2005, HKICPA issued Accounting Guideline 5 Merger Accounting for Common Control Combinations (AG 5) which sets out the principles to account for BCUCC using the predecessor carrying amount of the acquired business. This method is known as the 'predecessor method'. Although not mandatory, entities applying HKFRS generally follow AG 5 unless another approach (e.g. acquisition method under HKFRS/IFRS 3 Business Combinations) is adopted. In 2016, HKICPA conducted a post-implementation review of AG 5 to seek stakeholders' feedback on the benefits and challenges of applying AG 5. The feedback statement on the post-implementation review was published.



Published documents



Invitation to Comment

The Financial Reporting Standards Committee (FRSC) of the HKICPA is seeking comments on Exposure Draft Proposed Amendments to Accounting Guideline 5 Merger Accounting for Common Control Combinations. Please refer to the Open for comment documents of our webpage for details. The Exposure Draft is open for comment until 16 October 2020. 



International presentations

Month /Year           Event Topic
December 2015

Accounting Standards Advisory Forum

Pre-IPO BCUCC landscape in Hong Kong

November 2016          

Asian-Oceanian Standard-Setters Group meeting

Possible conceptual rationale for the accounting for BCUCC

September 2017 International Forum of Accounting Standard-Setters meeting Mergers and Acquisitions: the premise for separate accounting method / Our experience in applying predecessor method in Hong Kong and Italy
November 2017

Asian-Oceanian Standard-Setters Group meeting 

The evolution of the predecessor method

July 2018

Accounting Standards Advisory Forum

Joint investor survey results (Hong Kong and Italy)

October 2018

International Forum of Accounting Standard-Setters meeting

Our experience in applying predecessor method in Hong Kong and Italy

November 2018 Asian-Oceanian Standard-Setters Group meeting Accounting based on current values vs predecessor values


Last updated: 21 July 2020