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Ifrs  3 Ifrs 3 Presentation Transcript

  • IFRS- 3
    BUSINESS COMBINATION
  • Objective
    Is to set out the accounting & disclosure requirements for a business combination
  • CORE PRINCIPLE
    An acquirer of a business recognizes the assets acquired & liabilities assumed at their acquisition-date fair value & discloses relevant information nature and financial effects of the acquisition.
  • What is the Business Combination
    A transaction or other event that results in an acquirer obtaining control over one or more businesses.
  • Scope & Exclusion
    Transactions or other events that meet the definition of a business combination are subjected to IFRS-3
    This standard in not applicable to formation of joint venture,
    Acquisition of an assets or group of assets that do not constitute business & combination between entities or businessess under common control
  • APPLICATION
    Each BC should be accounted for using acquisition method(Purchases method)
    Identifying An Acquirer
    Determining acquisition date
    Recognizing & measuring
    Identifiable assets acquired, the liabilities assumed & any non-controlling interest in the acquiree
    Goodwill or a gain from a bargain purchases (capital reserve)
  • Pooling interest method not permitted under IFRS-3
    An entity should assess whether a particular transaction is a business combination or not.
    i.e. has the entity gained control of one or more businesses for making profit?
    Control of an entity is where one party has the power over another to “Govern its financial & operating policies so as to obtain the benefits from its activities
  • There will be only one acquirer
    For application of IFRS 3, emphasis is on acquisition of business rather than an assets or a group of assets.
    Purchases of assets or a group of assets, if they do not constitute business, do not give rise to goodwill, as also not covered by IFRS 3
    In a straightforward BC one entity will acquire another resulting, in a parent-subsidiary relationship
  • Steps in Business Combination
    1. Identify an acquirer
    2. Determining the acquisition date
    3. Recognition
    4. Measurements of Assets and Liablities
  • Identify an acquirer
    An acquirer is the entity that obtains control of the entity- the acquiree. The power to govern the financial & operating policies of an entity so as to obtained benefits from its activities
  • Determining the Acquisition date
    The acquisition date is defined as ‘the date on which the acquirer obtains control of the acquiree,
    which is normally the date on which the acquirer legally transfer the consideration for the business
  • Recognition
    Assets & liabilities recognized must be part of the exchange transaction between the acquirer and the acquiree and Not part of a separate transaction or transactions
    Intangible assets should be recognized by acquirer, the one which is separable from entity or acquired by law or contractual agreements.
  • Measurement of Assets & Liabilities
    The measurement principle is that an acquirer measures the identifiable tangible & intangible assets acquired and the liabilities assumed
  • Recognition & Measurement of goodwill
    A= Consideration paid
    B= Identifiable assets & liablitiesrecognised
    If A>B = GOODWILL
    B>A = gain from bargain purchases
  • Treatment of goodwill
    It will be either be carried in the statement of financial position at the amount recognizes
    Or it will reduced as impairment losses are recognizes
  • Treatment of gain from bargain purchases
    Gain from bargain purchases to be recognised in profit & loss account ( not in capital reserved as per AS 14 & as per Indian GAAP)