Definition of Business
A Business Consists of inputs and processes applied to the input to those inputs that have the ability to create output.
Any economic resources that create, or have the ability capability to create output when one or more processes are applied to it. For Example Tangible Assets or intangible assets, the ability to obtain access to necessary materials or rights and employees.
Any System, protocol, convention or any rule that when applied to an input or inputs, creates or has the ability to create outputs. For Example Strategic management processes, operational processes, and resource management processes. These processes typically are documented, but an organised workforce having the necessary skills and experience following rules and conventions may provide the necessary processes that are capable of being applied to inputs to create outputs. (Accounting, billing, payroll and other administrative systems typically are not processes used to create outputs.)
The result of input and processes applied to those inputs that provide or have the ability to provide a return in form of dividend to dividends, lower-cost or other economic benefits that directly to investors or other owners, members or participants.
An integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing a return in the form of dividends, lower costs or other economic benefits directly to investors or other owners, members or participants
However, businesses need not include all of the inputs or processes that the seller used in operating that business if market participants are capable of acquiring the business and continuing to produce outputs, for example, by integrating the business with their own inputs and processes.
The nature of the elements of a business varies by industry and by the structure of an entity’s operations (activities), including the entity’s stage of development. Established businesses often have many different types of inputs, processes and outputs, whereas new businesses often have few inputs and processes and sometimes only a single output (product). Nearly all businesses also have liabilities, but a business need not have liabilities.
An integrated set of activities and assets in the development stage might not output may consider it business if some factors include, but not limited:
(a) has begun planned principal activities;
(b) has employees, intellectual property and other inputs and processes that could be applied to those inputs;
(c) is pursuing a plan to produce outputs; and
(d) will be able to obtain access to customers that will purchase the outputs.
Need not all those factors to need to consider for a particular integrated set of activities and assets in the development stage to qualify as a business.
It means development companies like pharmaceutical companies who are conducting research and development activities through its skilled workforce may be considered as business.
In evaluating whether a particular set is a business, it is not relevant whether a seller operated the set as a business or whether the acquirer intends to operate the set as a business.