Business Combination Materials - Business Combination...

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IFRS 3 defines business combination is the bringing together of separate entities or businesses into one reporting entity. The result of nearly all business combinations is that one entity, the acquirer, obtains control of one or more other businesses, the acquiree. If an entity obtains control of one or more other entities that are not businesses, the bringing together of those entities is not a business combination. CONTROL – is exercised by an entity having power to govern the financial and operating decisions of the entity( entity being controlled) as a whole. IFRS 3 mandates that (a) all business combinations within its scope to be accounted for by applying the purchase method (REQUIREMENT). (b) requires an acquirer to be identified for every business combination within its scope. The acquirer is the combining entity that obtains control of the other combining entities or businesses. (c) requires an acquirer to measure the cost of a business combination as the aggregate of: the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the acquirer, in exchange for control of the acquiree; plus any costs directly attributable to the combination. (d) requires an acquirer to recognise separately, at the acquisition date, the acquiree’s identifiable assets, liabilities and contingent liabilities that satisfy the following recognition criteria at that date, regardless of whether they had been previously recognised in the acquiree’s financial statements: (i) in the case of an asset other than an intangible asset, it is probable that any associated future economic benefits will flow to the acquirer, and its fair value can be measured reliably; (ii) in the case of a liability other than a contingent liability, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and its fair value can be measured reliably; and (iii)in the case of an intangible asset or a contingent liability, its fair value can be measured reliably. (e) requires the identifiable assets, liabilities and contingent liabilities that satisfy the above recognition criteria to be measured initially by the acquirer at their fair values at the acquisition date , irrespective of the extent of any minority interest. (f) requires goodwill acquired in a business combination to be recognised by the acquirer as an asset from the acquisition date Goodwill is measured as the difference between: the aggregate of (i) the acquisition-date fair value of the consideration transferred, (ii) the amount of any NCI , and (iii) in a business combination achieved in stages, the acquisition-date fair value of the acquirer's previously-held equity interest in the acquiree; and the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed (measured in accordance with IFRS 3). If the difference above is negative, the resulting gain is recognised as a bargain
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Business Combination Materials - Business Combination...

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