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In a business combination, an acquired process (or group of processes) is 'substantive' when the acquired set has NO outputs at acquisition date if it is:
ACritical to develop/convert acquired inputs into outputs AND the acquired inputs include an organised workforce with skills/knowledge/experience plus other inputs the workforce can develop or convert into outputs
BIdentical to the process used by the acquirer in its existing operations
CCapable of generating revenue within 12 months of the acquisition date
DDocumented in writing and approved by the board of the acquirer
Answer & Solution
Correct answer: A. Critical to develop/convert acquired inputs into outputs AND the acquired inputs include an organised workforce with skills/knowledge/experience plus other inputs the workforce can develop or convert into outputs
Where the set has no outputs, the chapter (B7) requires the acquired process to be (i) critical to developing/converting inputs into outputs, AND (ii) accompanied by an organised workforce with necessary skills, knowledge or experience, plus other inputs the workforce can develop or convert. Documentation, identicality and a 12-month outputs target are not the criteria.
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