In 2001 the International Accounting Standards Board began a project to review IAS 22 Business Combinations (revised in 1998) as part of its initial agenda, with the objective of improving the quality of, and seeking international convergence on, the accounting for business combinations. The Board decided to address the accounting for business combinations in two phases.

As part of the first phase, the Board published in December 2002 ED 3 Business Combinations, together with an exposure draft of proposed related amendments to IAS 36 Impairment of Assets and IAS 38 Intangible Assets, with a comment deadline of 4 April 2003. The Board received 136 comment letters.

The Board concluded the first phase in March 2004 by issuing simultaneously IFRS 3 Business Combinations and revised versions of IAS 36 and IAS 38. The Board’s primary conclusion in the first phase was that virtually all business combinations are acquisitions. Accordingly, the Board decided to require the use of one method of accounting for business combinations - the acquisition method.

The US Financial Accounting Standards Board (FASB) also conducted a project on business combinations in multiple phases. The FASB concluded its first phase in June 2001 by issuing FASB Statements No. 141 Business Combinations (SFAS 141) and No. 142 Goodwill and Other Intangible Assets. The scope of that first phase was similar to IFRS 3 and the FASB reached similar conclusions on the major issues.