A Business Combination is a transaction or event in which two or more businesses are united into one. Usually, this occurs when one company acquires another, with the acquirer gaining control over the acquired company. Business combinations can take various forms such as mergers, acquisitions, or asset purchases. These events are significant as they bring changes to company operations, strategic goals, and financial reporting processes.

For example, when a company expands by acquiring a competitor, this is considered a business combination. Post-acquisition, the company will integrate the operations, leading to revenue, cost-saving synergies, and possibly a more competitive market position. The process often involves assessing the fair value of net assets acquired, identifying goodwill or intangible assets, and accounting for the transaction according to applicable standards, typically under frameworks like IFRS or GAAP.

Ensuring proper accounting of business combinations is crucial for accurate financial statements, particularly to correctly reflect changes on the Balance Sheet and Income Statement. Terms like Accumulated Depreciation, Amortization, or Audit might often be relevant aspects to assess after a business combination.