This document summarizes key changes in IFRS 3 (Revised) related to accounting for business combinations. Some significant changes include:
1) Purchase consideration now includes any previous equity interest in the acquired business, which must be remeasured at fair value on the acquisition date. Any gains or losses are recorded.
2) Contingent consideration must be recognized at fair value on the acquisition date, even if payment is not deemed probable. Subsequent changes are recognized in earnings rather than through goodwill.
3) Non-controlling interests can be measured either at fair value of net assets acquired or at full fair value, which affects how goodwill is calculated.
IFRS 3 (Revised 2008) provides guidance on accounting for business combinations. It requires acquisition-related costs to be excluded from the purchase price, introduces more guidance on contingent consideration, and allows for the choice to measure non-controlling interests at fair value or as a proportion of net assets. The standard also provides more guidance around accounting for pre-existing relationships, loss of control, and changes in ownership interests.
IFRS 3 provides guidance on accounting for business combinations. It defines a business combination as the acquisition of one business by another. The standard outlines the acquisition method for accounting, which requires identifying the acquirer, determining the acquisition date, recognizing and measuring identifiable assets and liabilities, and recognizing goodwill or a gain from a bargain purchase. Consideration transferred in a business combination is measured at fair value. Exceptions to the recognition and measurement principles are provided for items such as income taxes, contingent liabilities, and share-based payments.
IFRS 3 sets out the accounting requirements for business combinations. The core principle is that an acquirer must recognize the identifiable assets acquired and liabilities assumed at their acquisition-date fair values. Goodwill arises when the consideration transferred exceeds the net fair value of the identifiable assets and liabilities. Business combinations are accounted for using the acquisition method. The acquirer is identified and the acquisition date determined. Recognizable assets acquired and liabilities assumed are measured at their acquisition-date fair values. Any excess consideration over the net fair values is recognized as goodwill.
IFRS 3 establishes principles for accounting for business combinations. It requires acquirers to recognize identifiable assets acquired, liabilities assumed and any non-controlling interest at fair value. Goodwill is recognized as the excess of consideration transferred over the fair value of identifiable net assets. The acquisition method involves 4 steps - identifying the acquirer, determining the acquisition date, recognizing and measuring assets, liabilities and non-controlling interest, and recognizing and measuring goodwill or gain on bargain purchase. IFRS 3 also provides guidance on specific transactions like business combinations achieved in stages and accounting for acquisition costs.
IFRS 3 establishes principles for accounting for business combinations. It requires assets acquired and liabilities assumed to be measured at fair value and non-controlling interests to be measured either at fair value or proportionate share of net assets. Goodwill is calculated as the excess of consideration transferred over the fair value of net assets acquired. The acquisition method involves 4 steps - identifying the acquirer, determining the acquisition date, recognizing and measuring assets, liabilities and non-controlling interests, and recognizing and measuring goodwill or gain on bargain purchase. IFRS 3 provides additional guidance for specific transactions such as business combinations achieved in stages and accounting for acquisition costs.
The document summarizes IFRS 3 Business Combinations. It discusses the scope and application of the purchase method for business combinations, including identifying the acquirer, determining the cost of the business combination, and allocating the cost to assets and liabilities. It also covers goodwill, impairment testing, valuation considerations, transition guidance, and tax effects of business combinations.
The document summarizes key aspects of FAS 141(R) and FAS 160 regarding business combinations and consolidations. FAS 141(R) establishes principles for how acquirers account for business combinations, including recognizing and measuring identifiable assets, liabilities, non-controlling interests, and resulting goodwill. FAS 160 changes how non-controlling interests are displayed, measured, and disclosed in consolidated financial statements. The document outlines various changes introduced by the standards and their impacts on accounting for business combinations and non-controlling interests.
The document summarizes IFRS 3 Business Combinations. It outlines that IFRS 3 specifies that all business combinations must be accounted for using the purchase method. It defines key terms like business, acquisition date, and cost of a business combination. It describes how to identify the acquirer, measure assets and liabilities at fair value on the acquisition date, and account for goodwill and negative goodwill. Significant differences from Indian GAAP are also highlighted.
IFRS 3 (Revised 2008) provides guidance on accounting for business combinations. It requires acquisition-related costs to be excluded from the purchase price, introduces more guidance on contingent consideration, and allows for the choice to measure non-controlling interests at fair value or as a proportion of net assets. The standard also provides more guidance around accounting for pre-existing relationships, loss of control, and changes in ownership interests.
IFRS 3 provides guidance on accounting for business combinations. It defines a business combination as the acquisition of one business by another. The standard outlines the acquisition method for accounting, which requires identifying the acquirer, determining the acquisition date, recognizing and measuring identifiable assets and liabilities, and recognizing goodwill or a gain from a bargain purchase. Consideration transferred in a business combination is measured at fair value. Exceptions to the recognition and measurement principles are provided for items such as income taxes, contingent liabilities, and share-based payments.
IFRS 3 sets out the accounting requirements for business combinations. The core principle is that an acquirer must recognize the identifiable assets acquired and liabilities assumed at their acquisition-date fair values. Goodwill arises when the consideration transferred exceeds the net fair value of the identifiable assets and liabilities. Business combinations are accounted for using the acquisition method. The acquirer is identified and the acquisition date determined. Recognizable assets acquired and liabilities assumed are measured at their acquisition-date fair values. Any excess consideration over the net fair values is recognized as goodwill.
IFRS 3 establishes principles for accounting for business combinations. It requires acquirers to recognize identifiable assets acquired, liabilities assumed and any non-controlling interest at fair value. Goodwill is recognized as the excess of consideration transferred over the fair value of identifiable net assets. The acquisition method involves 4 steps - identifying the acquirer, determining the acquisition date, recognizing and measuring assets, liabilities and non-controlling interest, and recognizing and measuring goodwill or gain on bargain purchase. IFRS 3 also provides guidance on specific transactions like business combinations achieved in stages and accounting for acquisition costs.
IFRS 3 establishes principles for accounting for business combinations. It requires assets acquired and liabilities assumed to be measured at fair value and non-controlling interests to be measured either at fair value or proportionate share of net assets. Goodwill is calculated as the excess of consideration transferred over the fair value of net assets acquired. The acquisition method involves 4 steps - identifying the acquirer, determining the acquisition date, recognizing and measuring assets, liabilities and non-controlling interests, and recognizing and measuring goodwill or gain on bargain purchase. IFRS 3 provides additional guidance for specific transactions such as business combinations achieved in stages and accounting for acquisition costs.
The document summarizes IFRS 3 Business Combinations. It discusses the scope and application of the purchase method for business combinations, including identifying the acquirer, determining the cost of the business combination, and allocating the cost to assets and liabilities. It also covers goodwill, impairment testing, valuation considerations, transition guidance, and tax effects of business combinations.
The document summarizes key aspects of FAS 141(R) and FAS 160 regarding business combinations and consolidations. FAS 141(R) establishes principles for how acquirers account for business combinations, including recognizing and measuring identifiable assets, liabilities, non-controlling interests, and resulting goodwill. FAS 160 changes how non-controlling interests are displayed, measured, and disclosed in consolidated financial statements. The document outlines various changes introduced by the standards and their impacts on accounting for business combinations and non-controlling interests.
The document summarizes IFRS 3 Business Combinations. It outlines that IFRS 3 specifies that all business combinations must be accounted for using the purchase method. It defines key terms like business, acquisition date, and cost of a business combination. It describes how to identify the acquirer, measure assets and liabilities at fair value on the acquisition date, and account for goodwill and negative goodwill. Significant differences from Indian GAAP are also highlighted.
The document discusses the key differences between existing AS 14 (Accounting for Amalgamations) and the revised Exposure Draft of AS 14 on business combinations. Some major differences include:
1. The revised standard applies the acquisition method, requiring identifiable assets acquired and liabilities assumed to be measured at fair value on the acquisition date.
2. It provides more guidance on accounting for contingent consideration, bargain purchases, step acquisitions, and transaction costs.
3. Additional disclosures are required to enable users to evaluate the nature and financial effects of business combinations.
IFRS 3 requires contingent consideration to be recognized as part of the consideration for the acquiree at fair value. It also provides a choice in how to measure non-controlling interests, which affects the calculation of consolidated goodwill. Changes in fair value of contingent consideration after the acquisition date due to additional information are treated as measurement period adjustments, while changes due to subsequent events are accounted for differently depending on the nature of the contingent consideration.
This document discusses key concepts related to business combinations, including defining a business combination, applying the acquisition method, determining goodwill, assessing goodwill impairment, and identifying the acquirer. It provides learning objectives and definitions from IFRS 3 and ASPE related to business combinations. Examples are provided to illustrate accounting for asset acquisitions, share acquisitions, and amalgamations. The calculation and subsequent accounting for goodwill and non-controlling interests are also summarized.
A business combination is a transaction or other event in which a reporting entity (the acquirer) obtains control of one or more businesses (the acquiree).
IND AS 103 provides guidance on accounting for business combinations. It outlines a 5 step process: 1) identify the acquirer and acquisition date, 2) measure consideration transferred, 3) recognize identifiable assets acquired and liabilities assumed, 4) recognize non-controlling interests, and 5) recognize resulting goodwill or gain on bargain purchase. Consideration includes assets given, liabilities incurred, and equity instruments issued, measured at fair value. Identifiable assets and liabilities are recognized and measured at fair value. Non-controlling interests may be measured at fair value or proportionate share of net assets. Goodwill is recognized as the excess of consideration over fair values. Adjustments may be made to reflect new information for up to one
Ind AS 103 establishes principles and requirements for how an acquirer recognizes and measures identifiable assets acquired, liabilities assumed, and any non-controlling interest in an acquiree. It also provides guidance on how to recognize and measure goodwill or gain on a bargain purchase. The standard applies to business combinations but not to acquisitions of assets or groups of assets that do not constitute a business. Under the acquisition method, the acquirer recognizes and measures identifiable assets acquired and liabilities assumed at their acquisition-date fair values.
1. Big Net pays P3 million to acquire all of Smallport's assets and liabilities. The consideration includes P1 million cash and 20,000 shares worth P2 million. Since the consideration exceeds the fair value of net assets acquired, Big Net recognizes goodwill of P1 million.
2. Big Net pays P2 million consideration through issuing 20,000 shares worth that amount to acquire Smallport. Since the consideration equals the fair value of net assets acquired, no goodwill or bargain gain is recognized.
3. Business combinations involve an acquirer obtaining control of one or more businesses. The acquisition method is used, where the acquirer identifies and measures identifiable assets,
This document provides an overview of IND AS 103 on business combinations. It discusses the key principles, including:
1) All business combinations must be accounted for using the acquisition (purchase) method, which requires identifying an acquirer and measuring acquisition date fair values of the acquiree's assets and liabilities.
2) Goodwill arises when the consideration transferred exceeds the net fair values recognized and is not amortized but tested annually for impairment.
3) The acquirer recognizes the acquiree's identifiable assets, liabilities and contingent liabilities at their acquisition-date fair values. Any excess of cost over fair value is recognized as goodwill.
The document discusses IFRS 3 Business Combinations and the acquisition method for accounting for business combinations. It provides an overview of IFRS 3 and the key steps in the acquisition method, including identifying the acquirer, determining the acquisition date, recognizing and measuring the identifiable assets acquired and liabilities assumed at fair value, recognizing and measuring goodwill or gain from a bargain purchase, and accounting for non-controlling interests. It also provides an illustration of calculating goodwill and non-controlling interests under IFRS 3.
When to Consolidate and When not to?
Acquisition Method
Inter-company Entries
Consolidation Working Paper
Combined Financial Statements and how do they differ from Consolidated Financial Statements
Adjustments in Detail
The document summarizes the key changes and enhanced disclosure requirements under IND AS 103 for business combinations compared to Indian GAAP. The main changes include mandatory use of the purchase method, recording of all acquired assets and liabilities at fair value including contingent liabilities, prohibition of the pooling of interest method, and accounting for acquisition-related transaction costs as expenses. Goodwill is no longer amortized but tested annually for impairment. Extensive new disclosures are required regarding consideration transferred, non-controlling interests, revenues and profits of the acquired business. Completing the purchase price allocation in a timely manner is critical for financial reporting.
This document summarizes the key aspects of Ind AS 27 regarding separate financial statements. Ind AS 27 prescribes the accounting and disclosure requirements for investments in subsidiaries, joint ventures and associates when an entity prepares separate financial statements. It allows investments to be accounted for either at cost or in accordance with Ind AS 109. The standard also provides definitions, guidance on preparation of separate financial statements for investment entities, and disclosure requirements.
An Intro to Business Combination by Arthik DaviantiArthik Davianti
This document provides an overview of different methods of business expansion and organizational structures. It discusses reasons why companies expand, including economies of scale, new earning potential, and prestige. It defines a subsidiary as a corporation controlled by a parent company through majority stock ownership, limiting the parent's liability. The document also compares internal expansion, where a parent company creates new entities it controls, to external expansion through acquisitions. It examines different types of business combinations like mergers, consolidations, and stock acquisitions.
The proportionate completion method is
appropriate where performance consists of the
execution of more than one act. Revenue is
recognised based on the performance of each act.
2. Completed Service Contract Method
Performance consists of single act or where services
are rendered by indeterminate number of acts over a
specific period of time. Revenue is recognised when
the single act is completed or when the contract is
completed or substantially completed.
The document discusses key aspects of purchase price allocation (PPA) according to IFRS 3. It outlines that PPA should be an integrated part of every acquisition and involve identifying intangible assets, valuation analyses, and back testing. It describes the acquisition method under IFRS 3 which involves identifying assets/liabilities of the acquired company, measuring them at fair value, and recognizing any resulting goodwill or gain. Contingent liabilities may be recognized if the fair value can be measured reliably, unlike IAS 37.
IFRS 3 makes significant changes to the accounting for business combinations that will impact M&A strategy and transparency. Key impacts include:
- All combinations will be treated as acquisitions, eliminating merger accounting. More intangible assets will be identified and recognized.
- Goodwill will no longer be amortized but subject to annual impairment testing, likely resulting in more impairment charges.
- Negative goodwill will be recognized immediately in income rather than amortized. Restructuring costs will also impact earnings.
- Greater disclosures will be required on acquisition costs, asset valuations, and impairment testing, increasing transparency but also the resources required.
IAS 18 provides guidance on revenue recognition from the sale of goods, rendering of services, and interest, royalties, and dividends. It defines revenue as the gross inflow of economic benefits from an entity's ordinary activities. For revenue to be recognized under IAS 18, it must be probable future benefits will flow to the entity and the amount can be reliably measured. IAS 18 also addresses agency relationships and determining whether an entity is acting as a principal or agent in a transaction.
The purpose of this document is to outline the background to purchase price allocation, the process as well as commonly used methodology in valuing intangible assets
This document summarizes the key principles of IAS 18 regarding the recognition of revenue. The standard provides guidance on when revenue from the sale of goods or services should be recognized, and specifies that revenue is recognized when it is probable future economic benefits will flow to the entity and those benefits can be reliably measured. The document outlines the criteria for recognizing revenue from various types of transactions and arrangements, including sales of goods, rendering of services, financing transactions, and customer loyalty programs.
Introduction to developing or migrating models to be compliant to the OpenMI Standard. OpenMI is an open standard which allows dynamic linking of numerical models, such as river models rainfall-runoff models and so on. See also:
http://www.lictek.com
The Golden Ratio is a ratio of approximately 1.618 that is found in geometry. A Golden Rectangle is a rectangle whose length to width ratio is the Golden Ratio. If you cut squares from a Golden Rectangle, the remaining rectangle will also have this ratio. The Golden Rectangle has been used in architecture since ancient times, such as in the Parthenon in Greece, because it is considered one of the most visually pleasing shapes. Some research has also looked at applying the Golden Ratio to concepts like facial beauty.
The document discusses the key differences between existing AS 14 (Accounting for Amalgamations) and the revised Exposure Draft of AS 14 on business combinations. Some major differences include:
1. The revised standard applies the acquisition method, requiring identifiable assets acquired and liabilities assumed to be measured at fair value on the acquisition date.
2. It provides more guidance on accounting for contingent consideration, bargain purchases, step acquisitions, and transaction costs.
3. Additional disclosures are required to enable users to evaluate the nature and financial effects of business combinations.
IFRS 3 requires contingent consideration to be recognized as part of the consideration for the acquiree at fair value. It also provides a choice in how to measure non-controlling interests, which affects the calculation of consolidated goodwill. Changes in fair value of contingent consideration after the acquisition date due to additional information are treated as measurement period adjustments, while changes due to subsequent events are accounted for differently depending on the nature of the contingent consideration.
This document discusses key concepts related to business combinations, including defining a business combination, applying the acquisition method, determining goodwill, assessing goodwill impairment, and identifying the acquirer. It provides learning objectives and definitions from IFRS 3 and ASPE related to business combinations. Examples are provided to illustrate accounting for asset acquisitions, share acquisitions, and amalgamations. The calculation and subsequent accounting for goodwill and non-controlling interests are also summarized.
A business combination is a transaction or other event in which a reporting entity (the acquirer) obtains control of one or more businesses (the acquiree).
IND AS 103 provides guidance on accounting for business combinations. It outlines a 5 step process: 1) identify the acquirer and acquisition date, 2) measure consideration transferred, 3) recognize identifiable assets acquired and liabilities assumed, 4) recognize non-controlling interests, and 5) recognize resulting goodwill or gain on bargain purchase. Consideration includes assets given, liabilities incurred, and equity instruments issued, measured at fair value. Identifiable assets and liabilities are recognized and measured at fair value. Non-controlling interests may be measured at fair value or proportionate share of net assets. Goodwill is recognized as the excess of consideration over fair values. Adjustments may be made to reflect new information for up to one
Ind AS 103 establishes principles and requirements for how an acquirer recognizes and measures identifiable assets acquired, liabilities assumed, and any non-controlling interest in an acquiree. It also provides guidance on how to recognize and measure goodwill or gain on a bargain purchase. The standard applies to business combinations but not to acquisitions of assets or groups of assets that do not constitute a business. Under the acquisition method, the acquirer recognizes and measures identifiable assets acquired and liabilities assumed at their acquisition-date fair values.
1. Big Net pays P3 million to acquire all of Smallport's assets and liabilities. The consideration includes P1 million cash and 20,000 shares worth P2 million. Since the consideration exceeds the fair value of net assets acquired, Big Net recognizes goodwill of P1 million.
2. Big Net pays P2 million consideration through issuing 20,000 shares worth that amount to acquire Smallport. Since the consideration equals the fair value of net assets acquired, no goodwill or bargain gain is recognized.
3. Business combinations involve an acquirer obtaining control of one or more businesses. The acquisition method is used, where the acquirer identifies and measures identifiable assets,
This document provides an overview of IND AS 103 on business combinations. It discusses the key principles, including:
1) All business combinations must be accounted for using the acquisition (purchase) method, which requires identifying an acquirer and measuring acquisition date fair values of the acquiree's assets and liabilities.
2) Goodwill arises when the consideration transferred exceeds the net fair values recognized and is not amortized but tested annually for impairment.
3) The acquirer recognizes the acquiree's identifiable assets, liabilities and contingent liabilities at their acquisition-date fair values. Any excess of cost over fair value is recognized as goodwill.
The document discusses IFRS 3 Business Combinations and the acquisition method for accounting for business combinations. It provides an overview of IFRS 3 and the key steps in the acquisition method, including identifying the acquirer, determining the acquisition date, recognizing and measuring the identifiable assets acquired and liabilities assumed at fair value, recognizing and measuring goodwill or gain from a bargain purchase, and accounting for non-controlling interests. It also provides an illustration of calculating goodwill and non-controlling interests under IFRS 3.
When to Consolidate and When not to?
Acquisition Method
Inter-company Entries
Consolidation Working Paper
Combined Financial Statements and how do they differ from Consolidated Financial Statements
Adjustments in Detail
The document summarizes the key changes and enhanced disclosure requirements under IND AS 103 for business combinations compared to Indian GAAP. The main changes include mandatory use of the purchase method, recording of all acquired assets and liabilities at fair value including contingent liabilities, prohibition of the pooling of interest method, and accounting for acquisition-related transaction costs as expenses. Goodwill is no longer amortized but tested annually for impairment. Extensive new disclosures are required regarding consideration transferred, non-controlling interests, revenues and profits of the acquired business. Completing the purchase price allocation in a timely manner is critical for financial reporting.
This document summarizes the key aspects of Ind AS 27 regarding separate financial statements. Ind AS 27 prescribes the accounting and disclosure requirements for investments in subsidiaries, joint ventures and associates when an entity prepares separate financial statements. It allows investments to be accounted for either at cost or in accordance with Ind AS 109. The standard also provides definitions, guidance on preparation of separate financial statements for investment entities, and disclosure requirements.
An Intro to Business Combination by Arthik DaviantiArthik Davianti
This document provides an overview of different methods of business expansion and organizational structures. It discusses reasons why companies expand, including economies of scale, new earning potential, and prestige. It defines a subsidiary as a corporation controlled by a parent company through majority stock ownership, limiting the parent's liability. The document also compares internal expansion, where a parent company creates new entities it controls, to external expansion through acquisitions. It examines different types of business combinations like mergers, consolidations, and stock acquisitions.
The proportionate completion method is
appropriate where performance consists of the
execution of more than one act. Revenue is
recognised based on the performance of each act.
2. Completed Service Contract Method
Performance consists of single act or where services
are rendered by indeterminate number of acts over a
specific period of time. Revenue is recognised when
the single act is completed or when the contract is
completed or substantially completed.
The document discusses key aspects of purchase price allocation (PPA) according to IFRS 3. It outlines that PPA should be an integrated part of every acquisition and involve identifying intangible assets, valuation analyses, and back testing. It describes the acquisition method under IFRS 3 which involves identifying assets/liabilities of the acquired company, measuring them at fair value, and recognizing any resulting goodwill or gain. Contingent liabilities may be recognized if the fair value can be measured reliably, unlike IAS 37.
IFRS 3 makes significant changes to the accounting for business combinations that will impact M&A strategy and transparency. Key impacts include:
- All combinations will be treated as acquisitions, eliminating merger accounting. More intangible assets will be identified and recognized.
- Goodwill will no longer be amortized but subject to annual impairment testing, likely resulting in more impairment charges.
- Negative goodwill will be recognized immediately in income rather than amortized. Restructuring costs will also impact earnings.
- Greater disclosures will be required on acquisition costs, asset valuations, and impairment testing, increasing transparency but also the resources required.
IAS 18 provides guidance on revenue recognition from the sale of goods, rendering of services, and interest, royalties, and dividends. It defines revenue as the gross inflow of economic benefits from an entity's ordinary activities. For revenue to be recognized under IAS 18, it must be probable future benefits will flow to the entity and the amount can be reliably measured. IAS 18 also addresses agency relationships and determining whether an entity is acting as a principal or agent in a transaction.
The purpose of this document is to outline the background to purchase price allocation, the process as well as commonly used methodology in valuing intangible assets
This document summarizes the key principles of IAS 18 regarding the recognition of revenue. The standard provides guidance on when revenue from the sale of goods or services should be recognized, and specifies that revenue is recognized when it is probable future economic benefits will flow to the entity and those benefits can be reliably measured. The document outlines the criteria for recognizing revenue from various types of transactions and arrangements, including sales of goods, rendering of services, financing transactions, and customer loyalty programs.
Introduction to developing or migrating models to be compliant to the OpenMI Standard. OpenMI is an open standard which allows dynamic linking of numerical models, such as river models rainfall-runoff models and so on. See also:
http://www.lictek.com
The Golden Ratio is a ratio of approximately 1.618 that is found in geometry. A Golden Rectangle is a rectangle whose length to width ratio is the Golden Ratio. If you cut squares from a Golden Rectangle, the remaining rectangle will also have this ratio. The Golden Rectangle has been used in architecture since ancient times, such as in the Parthenon in Greece, because it is considered one of the most visually pleasing shapes. Some research has also looked at applying the Golden Ratio to concepts like facial beauty.
This document outlines responsibilities and resources for club presidents in Toastmasters. It discusses the president's role in running club meetings, overseeing the executive committee between meetings, and representing the club outside of meetings. Specific responsibilities include introducing guests, conducting business portions of meetings, creating budgets and success plans, and attending trainings. The document provides links to Toastmasters.org for more information on fulfilling responsibilities and utilizing resources to achieve success as club president.
Future World Giving - Recognising the potential of middle class givingIDIS
Apresentação realizada por Adam Pickering, International Policy Manager da Charities Aid Foundation (CAF), por ocasião da realização da primeira edição de 2014 dos módulos nacionais da CAF Foundation School, iniciativa no Brasil desenvolvida pelo IDIS.
The document discusses a worst case "bear" scenario where high government debt levels constrain economic growth over the long term, similar to Japan's "lost decade". Key points:
- Global debt has doubled over the past decade and is at all-time highs as a percentage of GDP.
- A Japanese-style recovery of persistent debt, weak growth, low rates could occur if debt is not reduced.
- The US fiscal situation in particular looks dire, with debt projected to exceed 100% of GDP by 2010.
- Recommendations focus on defensive assets that perform well in risk-averse, low-growth environments.
01. Negotiating Presentation For The Seminar Generic 2009 September Beta Rele...Pozzolini
This document discusses the concepts of otium (leisure) and negotium (work) in Latin culture. It provides etymologies and definitions for the words "negotiation" and "to negotiate". It also contains quotes about negotiation from historical figures and discusses qualities of effective negotiators. The document examines different types and areas of negotiation, and challenges the notion that all negotiations result in everyone winning.
The document discusses strategies for developing a successful career in auditing. It recommends taking a long-term view of career development through rotational programs, mentoring, and continuing education. It also emphasizes the importance of soft skills like collaboration and networking, and suggests attending professional development events to expand one's skills and network. The talent shortage in auditing means companies must focus on retention through career growth opportunities and an engaging corporate culture.
The document summarizes a Slovak fashion night event held on May 14, 2009 in New York City. It introduced designs by several Slovak and American designers. The event also featured musical performances and art works. Proceeds from the event supported a nonprofit organization for people with disabilities. VIP tickets cost $150 and provided additional access and gifts. The goal of the event was to expose American audiences to Slovak culture and enable collaboration between artists from Slovakia and the US.
This document discusses how to achieve success for a Toastmasters club. It begins by introducing the speaker and their experience and credentials in Toastmasters. The main topics covered are:
1. Establishing a clear mission and vision for the club that members help create and feel invested in.
2. Developing a Club Success Plan that outlines specific, measurable goals and assigns responsibilities to members to ensure goals are accomplished.
3. Pursuing the goals required to earn Distinguished Club status from Toastmasters International, such as member education awards and recruiting new members.
4. Regularly monitoring progress, recognizing accomplishments, and making adjustments to ensure the club thrives.
Kazakhstan - Largest Central Asian country rich in oil. Pursued privatization and was able to export oil at world prices, leading to economic growth. Oil was the main driver of its economic boom.
Kyrgyzstan - One of the poorest states with no resources. Pursued rapid reforms but implementation was unsuccessful. Limited foreign investment and high spending led to debt and stalled reforms.
Tajikistan - Also poor with no resources and civil war in the 1990s consumed the country. Post-war liberal policies were poorly implemented, leading to disastrous economic performance. No resources and instability meant poverty.
This document provides a summary of key leadership qualities as outlined by Jim Rohn:
1) Be strong but not rude, kind but not weak, and bold but not a bully.
2) Be thoughtful but not arrogant.
3) Have humor but without folly.
The document then introduces an individual, Jon-Paul Delange, and outlines their skills and experiences in business process analysis, team building, and leading teams to success even in difficult environments.
Mary Anne Burke Uof Md Rh Smith Bus Grad Audit Careers March 2012maryanneburke
This document provides an overview of pursuing a career in internal auditing. It discusses the importance of understanding the hiring process and challenges companies face in hiring talent. Key skill sets needed to advance one's career are communication, networking, and technical skills like risk management and internal controls. The document recommends gaining industry certifications, using social media to build networks, and preparing resumes and interviews. Overall it promotes internal auditing as a way to learn skills, gain visibility within an organization, and have a rewarding career path.
El documento discute los desafíos de la asociatividad en Chile. Señala que más del 50% de los trabajadores están en empleos informales y ganan sólo el salario mínimo. Propone que la asociatividad puede mejorar las condiciones laborales y de vida. También destaca la importancia de fortalecer las capacidades empresariales, la gestión de calidad y la internacionalización para aprovechar las oportunidades comerciales.
The document discusses the key assumptions, principles, and constraints of GAAP (Generally Accepted Accounting Principles). It outlines four main assumptions: 1) entities are separate from their owners, 2) entities are ongoing concerns, 3) measurements are quantifiable and reported in currency units, and 4) entities' operations can be divided into periods. It also describes four main principles: 1) the historical cost of assets, 2) accrual-based revenue recognition, 3) matching revenues and expenses, and 4) full disclosure. Finally, it notes four main constraints: 1) estimates and judgments are used, 2) materiality of transactions, 3) consistency across periods, and 4) conservatism in financial reporting.
IAS 37 sets out the accounting treatment and disclosure requirements for provisions, contingent liabilities, and contingent assets. A provision is recognized when an entity has a present obligation from a past event, an outflow of resources is probable to settle the obligation, and the amount can be reliably estimated. Contingent liabilities are possible obligations that arise from past events whose existence will be confirmed only by uncertain future events or are present obligations where an outflow is not probable or cannot be reliably estimated. Contingent assets are possible assets from past events that will be confirmed only by uncertain future events. The standard provides guidance on recognition criteria, measurement, presentation, and disclosure of provisions, contingent liabilities, and contingent assets.
Accounting concepts and principles provide a framework for financial reporting and ensure users are not misled. Some key concepts are:
- Going concern assumes the business will continue operating indefinitely.
- Entity treats the business and its owners separately.
- Duality means every transaction has two aspects recorded.
- Realization recognizes revenue when goods/services are delivered.
- Matching recognizes revenue and expenses in the periods to which they relate.
This document discusses key accounting principles and concepts, including:
- Accounting principles provide guidelines for sound accounting practices and procedures to record and report financial performance. They are classified into concepts and conventions.
- Key concepts include business entity, money measurement, historical cost, going concern, dual aspect, realization, accrual, accounting period, and matching.
- Key conventions include consistency, conservatism/prudence, full disclosure, and materiality. Consistency provides comparability, conservatism plays it safe, full disclosure provides all significant information, and materiality focuses on important items.
This document discusses key accounting principles and concepts, including:
- Accounting principles provide guidelines for sound accounting practices and procedures to record and report financial performance. They are classified into concepts and conventions.
- Key concepts include business entity, money measurement, historical cost, going concern, dual aspect, realization, accrual, accounting period, and matching.
- Key conventions include consistency, conservatism/prudence, full disclosure, and materiality. Consistency provides comparability, conservatism plays it safe, full disclosure provides all significant information, and materiality focuses on important items.
Lease accounting received an accounting overhaul with the recent release of the Financial Accounting Standards Board (FASB)'s Accounting Standards Update 2016-02 Leases (Topic 842). The new standard most significantly changes lessee accounting compared to existing US GAAP, but also has some targeted changes for lessor accounting. Overall, ASU 2016-02 seeks to improve transparency to the economics of lease transactions and bring lease accounting into line with other recently released accounting standards updates, such as the changes to Revenue from Contracts with Customers (Topic 606).
WEEK 5 LECTURE NOTESAnalysis of Financial Statements & Other R.docxcockekeshia
WEEK 5 LECTURE NOTES
Analysis of Financial Statements & Other Reporting Issues
This week we will conclude with the following specific financial reporting topics:
· Inflation - accounting for changing prices.
· Business combinations and consolidated financials.
· Segment reporting.
Historical cost accounting in a period of inflation understates asset values (and related expenses) and overstates income. It ignores the gains and losses in purchasing power caused by inflation that arise from holding monetary assets and liabilities.
Methods of accounting for inflation are
· general purchasing power (GPP) accounting, and
· current cost (CC) accounting.
General Purchasing Power Accounting
· Nonmonetary assets and stockholders’ equity accounts are restated for changes in the general price level.
· Cost of goods sold and depreciation/amortization are based on restated asset values and the net purchasing power gain/loss on the net monetary liability/asset position is included in income.
· Income is the amount that can be paid as a dividend while maintaining the purchasing power of capital.
Current Cost Accounting
· Nonmonetary assets are revalued to current cost.
· Cost of goods sold and depreciation/amortization are based on revalued amounts.
· Income is the amount that can be paid as a dividend while maintaining physical capital.
IAS 29
Deloitte: IAS 29 Financial Reporting in Hyperinflationary Economies applies where an entity's functional currency is that of a hyperinflationary economy. The standard does not prescribe when hyperinflation arises but requires the financial statements (and corresponding figures for previous periods) of an entity with a functional currency that is hyperinflationary to be restated for the changes in the general pricing power of the functional currency.
IAS 29 was issued in July 1989 and is operative for periods beginning on or after 1 January 1990.
IAS 21
Deloitte: IAS 21 The Effects of Changes in Foreign Exchange Rates outlines how to account for foreign currency transactions and operations in financial statements, and also how to translate financial statements into a presentation currency. An entity is required to determine a functional currency (for each of its operations if necessary) based on the primary economic environment in which it operates and generally records foreign currency transactions using the spot conversion rate to that functional currency on the date of the transaction.
IAS 21 was reissued in December 2003 and applies to annual periods beginning on or after 1 January 2005.
IAS 29 requires the use of GPP accounting by firms that report in the currency of a hyperinflationary economy.
IAS 21 requires the financial statements of a foreign operation located in a hyperinflationary economy to first be adjusted for inflation in accordance with IAS 29 before translation into the parent company’s reporting currency.
IFRS 3
Deloitte: IFRS 3 Business Combinations outlines the acco.
The document provides a summary of key aspects of various Indian Accounting Standards (Ind AS). It discusses the objectives, requirements and differences compared to previous Indian GAAP/ IFRS of various Ind AS like Ind AS 1 on presentation of financial statements, Ind AS 2 on inventories, Ind AS 7 on statement of cash flows, Ind AS 8 on accounting policies etc. For each Ind AS, it highlights important principles, disclosure requirements, and carve outs or differences between Ind AS and corresponding IFRS.
This document provides an overview of the demerger process under Indian law. It begins with definitions of a demerger and discusses the key tax considerations from the 2019 Union Budget. It then explains the different types of demergers and compares the demerger provisions under the Companies Act and Income Tax Act. The remainder of the document outlines the regulatory requirements and process for undertaking a demerger according to the Companies Act, SEBI regulations, and important documentation needed.
The third quarter was all about hedging and complex financial instruments. Two accounting standards updates will simplify accounting for entities and the users of their financial statements.
(1) ACQUISITION EXPENSES Acquirers may incur millions in direct an.pdfanandatalapatra
(1) ACQUISITION EXPENSES
Acquirers may incur millions in direct and indirect costs finding targets, gathering and analyzing
information, seeking funds and negotiating deals. The question is how to report these costs.
Current GAAP . These costs are deferred by adding them to the purchase price. In all likelihood,
they increase recorded goodwill, where they remain until and unless impairment is recognized.
Deficiency . Although pre-transaction costs are necessary, they don’t add value to acquired
assets (including goodwill) and they are not assets on their own. It’s questionable whether
putting them on a balance sheet is useful.
New standard . Statement no. 141(R) follows the tenet that only real assets should be recorded
for a combination. Because acquisition-related costs are not assets, they will be charged to
expense. Exhibit 1 shows them being moved off the statement of financial position and onto the
income statement
(2) BARGAIN PURCHASE GAIN
In rare circumstances, an acquirer strikes a favorable deal and pays less than the aggregate fair
value of purchased net assets. These transactions raise two issues—at what amounts should
individual assets and liabilities be recorded, and is it useful to recognize a bargain purchase gain?
Current GAAP. The excess value is considered “negative goodwill.” Because of its focus on
cost, current practice selectively reduces certain asset carrying values until the aggregate total
equals the purchase price. (In very rare circumstances, any unallocated difference is treated as an
extraordinary gain.)
Deficiency. The balance sheet underreports the value at hand and available to management for
earning returns. In addition, management’s successful negotiation is not immediately reflected in
reported income.
New standard. Acquired assets and liabilities will be recorded at fair value and any excess over
the purchase price will be credited to a gain that flows to the income statement, net of deferred
taxes. The outcome will likely be more complete and useful statements of financial position and
income.
(3) CONTINGENT CONSIDERATION
In major transactions such as combinations, sizable spreads initially exist between amounts
buyers and sellers offer to pay and accept. One way to close that gap is contingent consideration
arrangements in which, depending on future events, a buyer agrees to pay an additional amount
or a seller agrees to refund part of the purchase price. Because contingencies can be difficult to
pin down, many issues have been raised about their financial statement effects.
Current GAAP. Most contingent consideration arrangements are ignored in determining the
recorded price. When additional payments based on earnings targets occur, their amounts are
added to goodwill. If payments are tied to stock price changes, paid-in capital is credited. If
refunds are received, the buyer reduces goodwill or paid-in capital.
Deficiency. In these circumstances, not immediately recognizing the contingent assets or
li.
This document discusses key accounting concepts and conventions. It explains 11 accounting concepts including business entity, money measurement, going concern, accounting period, historical cost, dual aspect, revenue recognition, matching, accrual, objectivity and timeliness. It also discusses 4 accounting conventions: full disclosure, consistency, conservatism and materiality. The concepts provide the foundation for accounting and financial reporting while the conventions are generally accepted practices adopted by accountants. The document differentiates between concepts, which are established by law, and conventions, which are based on customs.
469206 Basic Underlying Accounting PrinciplesMarlin Duo
The document outlines several basic underlying accounting principles including:
- Revenue is recognized when delivery has occurred, services have been rendered, the price is fixed, and collectibility is reasonably assured.
- The matching concept requires that revenue and expenses be recorded in the same accounting period.
- Historical cost is the proper basis for recording assets, expenses, equity, and other accounts.
- Financial statements must include all necessary information for valid decision making.
- Accounting procedures must be consistent from period to period.
Accounting for Mergers and Acquisitions.pdfRoman889398
The document summarizes accounting standards for mergers and acquisitions under previous Indian accounting standards (AS 14) and the current Ind AS 103. Under AS 14, amalgamations were classified as mergers or purchases based on certain criteria, with mergers using pooling of interests and purchases using purchase accounting. Ind AS 103 requires all business combinations to use the acquisition method, which involves identifying assets acquired and liabilities assumed at fair value and any excess recorded as goodwill or gain. It also prohibits pooling of interests except for common control transactions.
Problems based on accounting standards and guidance notes finalDwara Balaji
This document contains 12 questions related to accounting standards and guidance notes. The questions cover topics such as events occurring after the balance sheet date, prior period items, pre-incorporation expenses, revaluation of fixed assets, revenue recognition, extraordinary items, cash flow statements, and changes in accounting policies. For each question, the relevant accounting treatments, disclosures, or guidance from standards are discussed in detail in the response.
1. The ICAI established the Accounting Standards Board in 1977 to issue accounting standards in India. Initially, standards were mandatory only for ICAI members acting as auditors. In 1999, standards became mandatory for companies through an amendment to the Companies Act 1956.
2. There is a need for convergence with global standards like IFRS issued by the IASB due to the increasing globalization of markets. More than 130 countries now require or permit IFRS.
3. Rather than adopt IFRS wholesale, India has formulated IFRS-converged standards called Indian Accounting Standards (Ind AS) which have been notified by the MCA. A phased implementation of Ind AS for companies
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Acca ifrs 3
1. technical
page 50
student accountANT
februARY 2009
RELEVANTTOACCAQUALIFICATIONPAPERP2
IFRS 3 (Revised), Business Combinations, will result in significant changes
in accounting for business combinations. IFRS 3 (Revised) further develops
the acquisition model and applies to more transactions, as combinations by
contract alone and of mutual entities are included in the standard. Common
control transactions and the formation of joint ventures are not dealt with by
the standard. IFRS 3 (Revised) affects the first accounting period beginning
on or after 1 July 2009. It can be applied early, but only to an accounting
period beginning on or after 30 June 2007. Importantly, retrospective
application to earlier business combinations is not allowed.
PURCHASE CONSIDERATION
Some of the most significant changes in IFRS 3 (Revised) are in relation
to the purchase consideration, which now includes the fair value of all
interests that the acquirer may have held previously in the acquired
business. This includes any interest in an associate or joint venture, or
other equity interests of the acquired business. Any previous stake is seen
as being ‘given up’ to acquire the entity, and a gain or loss is recorded on
its disposal.
If the acquirer already held an interest in the acquired entity before
acquisition, the standard requires the existing stake to be re-measured to
fair value at the date of acquisition, taking into account any movement to
the income statement together with any gains previously recorded in equity
that relate to the existing holding. If the value of the stake has increased,
there will be a gain recognised in the statement of comprehensive income
(income statement) of the acquirer at the date of the business combination.
A loss would only occur if the existing interest has a book value in excess of
the proportion of the fair value of the business obtained and no impairment
had been recorded previously. This loss situation is not expected to
occur frequently.
The requirements for recognition of contingent consideration have been
amended. Contingent consideration now has to be recognised at fair value
even if payment is not deemed to be probable at the date of the acquisition.
EXAMPLE 1
Josey acquires 100% of the equity of Burton on 31 December 2008. There
are three elements to the purchase consideration: an immediate payment of
$5m, and two further payments of $1m if the return on capital employed
(ROCE) exceeds 10% in each of the subsequent financial years ending
31 December. All indicators have suggested that this target will be met. Josey
uses a discount rate of 7% in any present value calculations.
Requirement:
Determine the value of the investment.
Solution
The two payments that are conditional upon reaching the target ROCE are
contingent consideration and the fair value of $(1m/1.07 + 1m/1.072
) ie
$1.81m will be added to the immediate cash payment of $5m to give a total
consideration of $6.81m.
All subsequent changes in debt-contingent consideration are recognised
in the income statement, rather than against goodwill, as they are deemed to
be a liability recognised under IAS 32/39. An increase in the liability for good
performance by the subsidiary results in an expense in the income statement,
and under-performance against targets will result in a reduction in the
expected payment and will be recorded as a gain in the income statement.
These changes were previously recorded against goodwill.
The nature of the contingent consideration is important as it may meet
the definition of a liability or equity. If it meets the definition of an equity, then
there will be no re-measurement as per IAS 32/39. The new requirement is
that contingent consideration is fair valued at acquisition and, unless it is
equity, is subsequently re-measured through earnings rather than the historic
practice of re-measuring through goodwill. This change is likely to increase
the focus and attention on the opening fair value calculation and subsequent
re-measurements.
The standard also requires any gain on a ‘bargain purchase’ (negative
goodwill) to be recorded in the income statement, as in the previous standard.
Transaction costs no longer form a part of the acquisition price; they are
expensed as incurred. Transaction costs are not deemed to be part of what is
paid to the seller of a business. They are also not deemed to be assets of the
purchased business that should be recognised on acquisition. The standard
requires entities to disclose the amount of transaction costs that have
been incurred.
This first article in a two-part series provides an introduction to IFRS 3 and IAS 27, including
piecemeal acquisitions and disposals. The second article – in the April 2009 issue of
student accountant – will tackle complex groups.
BUSINESS
COMBINATIONS:IFRS3
(REVISED)
2. technical
page 51
The standard clarifies accounting for employee share-based payments
by providing additional guidance on valuation, as well as on how to decide
whether share awards are part of the consideration for the business
combination or are compensation for future services.
GOODWILL AND NON-CONTROLLING INTERESTS (NCIs)
The revised standard gives entities the option, on an individual transaction
basis, to measure NCIs (minority interests) at the fair value of their proportion
of identifiable assets and liabilities, or at full fair value. The first method will
result in the measurement of goodwill, a process which is basically the same
as in the existing IFRS. However, the second method will record goodwill on
the NCI as well as on the acquired controlling interest. Goodwill continues to
be a residual but it will be a different residual under IFRS 3 (Revised) if the
full fair value method is used as compared to the previous standard. This is
partly because all of the consideration, including any previously held interest
in the acquired business, is measured at fair value, but it is also because
goodwill can be measured:
as the difference between the consideration paid and the purchaser’s
share of identifiable net assets acquired: this is a ‘partial goodwill’
method because the NCI is recognised at its share of identifiable net
assets and does not include any goodwill
on a ‘full goodwill’ basis: this means that goodwill is recognised for the
NCI in a subsidiary as well as the controlling interest.
EXAMPLE 2
Missile acquires a subsidiary on 1 January 2008. The fair value of the
identifiable net assets of the subsidiary were $2,170m. Missile acquired
70% of the shares of the subsidiary for $2.145m. The NCI was fair valued
at $683m.
Requirement:
Compare the value of goodwill under the partial and full methods.
Solution
Goodwill based on the partial and full goodwill methods under IFRS 3
(Revised) would be:
Partial goodwill $m
Purchase consideration 2,145
Fair value of identifiable net assets (2,170)
NCI (30% x 2,170) 651
Goodwill 626
Full goodwill $m
Purchase consideration 2,145
NCI 683
2,828
Fair value of identifiable net assets (2,170)
Goodwill 658
It can be seen that goodwill is effectively adjusted for the change in the
value of the NCI, which represents the goodwill attributable to the NCI of
$32m ($658m - $626m). Choosing this method of accounting for NCI
only makes a difference in an acquisition where less than 100% of the
acquired business is purchased. The full goodwill method will increase
reported net assets on the balance sheet, which means that any future
impairment of goodwill will be greater. Although measuring NCI at fair
value may prove difficult, goodwill impairment testing is likely to be easier
under full goodwill, as there is no need to gross-up goodwill for partially
owned subsidiaries.
FAIR VALUING ASSETS AND LIABILITIES
IFRS 3 (Revised) has introduced some changes to the assets and liabilities
recognised in the acquisition balance sheet. The existing requirement to
recognise all of the identifiable assets and liabilities of the acquiree is
retained. Most assets are recognised at fair value, with exceptions for certain
items such as deferred tax and pension obligations. The IASB has provided
additional clarity that may well result in more intangible assets being
recognised. Acquirers are required to recognise brands, licences and customer
relationships, and other intangible assets.
There is very little change to current guidance under IFRS 3 (Revised)
as regards contingencies. Contingent assets are not recognised, and
contingent liabilities are measured at fair value. After the date of the business
combination, contingent liabilities are re-measured at the higher of the
original amount and the amount under the relevant standard.
There are other ongoing projects on standards that are linked to business
combinations, for example on provisions (IAS 37) and on deferred tax (IAS
12), that may affect either recognition or measurement at the acquisition date
or in subsequent accounting.
The acquirer can seldom recognise a reorganisation provision at the date
of the business combination. There is no change from the previous guidance
in the new standard: the ability of an acquirer to recognise a liability for
terminating or reducing the activities of the acquiree is severely restricted.
A restructuring provision can be recognised in a business combination only
when the acquiree has, at the acquisition date, an existing liability for which
there are detailed conditions in IAS 37, but these conditions are unlikely to
exist at the acquisition date in most business combinations.
An acquirer has a maximum period of 12 months from the date of
acquisition to finalise the acquisition accounting. The adjustment period
ends when the acquirer has gathered all the necessary information, subject
to the 12-month maximum. There is no exemption from the 12-month rule
for deferred tax assets or changes in the amount of contingent consideration.
The revised standard will only allow adjustments against goodwill within this
one-year period.
The financial statements will require some new disclosures which will
inevitably make them longer. Examples are: where NCI is measured at fair
value, the valuation methods used for determining that value; and in a step
acquisition, disclosure of the fair value of any previously held equity interest
in the acquiree, and the amount of gain or loss recognised in the income
statement resulting from re-measurement.
IAS 27 (REVISED), CONSOLIDATED AND SEPARATE
FINANCIAL STATEMENTS
This revised standard moves IFRS toward the use of the economic entity
approach; current practice is the parent company approach. The economic
entity approach treats all providers of equity capital as shareholders of the
entity, even when they are not shareholders in the parent company. The
parent company approach sees the financial statements from the perspective
of the parent company’s shareholders.
For example, disposal of a partial interest in a subsidiary in which the
parent company retains control, does not result in a gain or loss but in an
increase or decrease in equity under the economic entity approach. Purchase
of some or all of the NCI is treated as a treasury transaction and accounted
for in equity. A partial disposal of an interest in a subsidiary in which
the parent company loses control but retains an interest as an associate,
creates the recognition of gain or loss on the entire interest. A gain or loss
is recognised on the part that has been disposed of, and a further holding
gain is recognised on the interest retained, being the difference between the
fair value of the interest and the book value of the interest. The gains are
recognised in the statement of comprehensive income. Amendments to IAS
28, Investments in Associates, and IAS 31, Interests in Joint Ventures,
extend this treatment to associates and joint ventures.
EXAMPLE 3
Step acquisition
On 1 January 2008, A acquired a 50% interest in B for $60m. A already
LINKED PERFORMANCE OBJECTIVEs
studying paper P2? did you know that PERFORMANCE
OBJECTIVEs 10 AND 11 ARE linked?
3. technical
page 52
student accountANT
februARY 2009
held a 20% interest which had been acquired for $20m but which was
valued at $24m at 1 January 2008. The fair value of the NCI at 1 January
2008 was $40m, and the fair value of the identifiable net assets of B
was $110m. The goodwill calculation would be as follows, using the full
goodwill method:
$m $m
1 January 2008 consideration 60
Fair value of interest held 24
84
NCI 40
124
Fair value of identifiable net assets (110)
Goodwill 14
A gain of $4m would be recorded on the increase in the value of the previous
holding in B.
EXAMPLE 4
Acquisition of part of an NCI
On 1 January 2008, Rage acquired 70% of the equity interests of Pin, a public
limited company. The purchase consideration comprised cash of $360m. The
fair value of the identifiable net assets was $480m. The fair value of the NCI
in Pin was $210m on 1 January 2008. Rage wishes to use the full goodwill
method for all acquisitions. Rage acquired a further 10% interest from the NCIs
in Pin on 31 December 2008 for a cash consideration of $85m. The carrying
value of the net assets of Pin was $535m at 31 December 2008.
$m $m
Fair value of consideration for 70% interest 360
Fair value of NCI 210 570
Fair value of identifiable net assets (480)
Goodwill 90
Acquisition of further interest
The net assets of Pin have increased by $(535 - 480)m ie $55m and
therefore the NCI has increased by 30% of $55m, ie $16.5m. However,
Rage has purchased an additional 10% of the shares and this is treated
as a treasury transaction. There is no adjustment to goodwill on the
further acquisition.
$m
Pin NCI, 1 January 2008 210
Share of increase in net assets in post-acquisition period 16.5
Net assets, 31 December 2008 226.5
Transfer to equity of Rage (10/30 x 226.5) (75.5)
Balance at 31 December 2008 – NCI 151
Fair value of consideration 85
Charge to NCI (75.5)
Negative movement in equity 9.5
Rage has effectively purchased a further share of the NCI, with the
premium paid for that share naturally being charged to equity. The
situation is comparable when a parent company sells part of its holding but
retains control.
EXAMPLE 5
Disposal of part of holding to NCI
Using Example 4, instead of acquiring a further 10%, Rage disposes
of a 10% interest to the NCIs in Pin on 31 December 2008 for a cash
consideration of $65m. The carrying value of the net assets of Pin is $535m
at 31 December 2008.
$m
Pin net assets at 1 January 2008 480
Increase in net assets 55
Net assets at 31 December 2008 535
Fair value of consideration 65
Transfer to NCI (10% x (535 net assets + 90 goodwill)) (62.5)
Positive movement in equity 2.5
The parent has effectively sold 10% of the carrying value of the net assets
(including goodwill) of the subsidiary ($62.5m) at 31 December 2008 for a
consideration of $65m, giving a profit of $2.5m, which is taken to equity.
DISPOSAL OF CONTROLLING INTEREST WHILE RETAINING ASSOCIATE
HOLDING
IAS 27 sets out the adjustments to be made when a parent loses control of
a subsidiary:
Derecognise the carrying amount of assets (including goodwill), liabilities
and NCIs
Recognise the fair value of consideration received
Recognise any distribution of shares to owners
Reclassify to profit or loss any amounts (the entire amount, not a
proportion) relating to the subsidiary’s assets and liabilities previously
recognised in other comprehensive income, as if the assets and liabilities
had been disposed of directly
Recognise any resulting difference as a gain or loss in profit or loss
attributable to the parent
Recognise the fair value of any residual interest.
EXAMPLE 6
Disposal of controlling interest
On 1 January 2008, Rage acquired a 90% interest in Machine, a public
limited company, for a cash consideration of $80m. Machine’s identifiable
net assets had a fair value of £74m and the NCI had a fair value of $6m.
Rage uses the full goodwill method. On 31 December 2008, Grange disposed
of 65% of the equity of Machine (no other investor obtained control as a
result of the disposal) when its identifiable net assets were $83m. Of the
increase in net assets, $6m had been reported in profit or loss, and $3m
had been reported in comprehensive income. The sale proceeds were
$65m, and the remaining equity interest was fair valued at $25m. After the
disposal, Machine is classified as an associate under IAS 28, Investments in
Associates. The gain recognised in profit or loss would be as follows:
$m
Fair value of consideration 65
Fair value of residual interest to be recognised as an associate 25
Gain reported in comprehensive income 3
93
Less net assets and goodwill derecognised:
net assets (83)
goodwill (80 + 6 - 74) (12)
Loss on disposal to profit or loss (2)
After the sale of the interest, the holding in the associate will be fair valued
at $25m.
As can be seen from the points raised above, IFRS 3 (Revised) and IAS
27 (Revised) will potentially mean a substantial change to the ways in which
business combinations, and changes in shareholdings, will be accounted for
within the real world.
Complex group structures have not been considered within this article
and will be tackled in a future article.
Graham Holt is examiner for Paper P2