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IFRS 3 - Business Combinations, R.E at acquisition - Coggle Diagram
IFRS 3 - Business Combinations
Acquisition Date
Consider all pertinent facts and circumstances:
provides evidence of the ability to
However, control may be obtained earlier or later than the closing date
govern the financial and operating policies (Control)
Which is the closing date
Generally the day consideration is legally transferred and the Assets and Liabilities are acquired
Date control is obtained
Measurement
D.T When there is a Residual Value:
FV - RV = Realised through use, thus 28%
Retained Earnings
RV - CP = Realised through sale, thus 22.4%
M2m Reserve
Contingent liability recognised where No tax consequences will arise will have no DT as it was not recognised in Separate AFS of Acquiree
Revaluation Surplus: Land & Other where there are no Tax consequences. Always recognised net of DT.
Lease Equalisation reserve (From Operating lease) is not a true Asset/Liability, thus have to be derecognised from AFS with DT Consequences
28%
For all the FV movements
Acquisition,
should determine if it affects, Revaluation Surplus, M2M reserve or Retained Earnings
Indemnification assets - In accordance to the indemnification item
For example, if Land has CA of R100k and FV of R120k. Recognition of the Land to FV +R20k will trigger DT @ 22.4%
Lease where Acquiree is a LESSEE:
If Information provides that there are no tax consequences with respect to those assets, The initial recognition of the Assets/Liabilities
FV
will ALWAYS trigger DT
Acquirer not required to recognise ROUA & Lease liability if lease is a short term lease
Measure identifiable Assets acquired and Liabilities assumed
FV
Lease liability -
Present
value of remaining pmts (As if new lease)
ROUA - Same as Lease liability
Acquiree is a Lessor - Cannot reclassify
Consideration Transferred
If classified as A/L (IFRS 9) - Measured @ FV AND gains/losses in P/L
If classified as Equity - Not remeasured
Cont consideration classification NB
Transaction costs, Acquisition related costs & reimbursement (Expensed)
Transaction costs of Liabilities incurred are not taken into account in determining the FV of liability
The probability of a contigent consideration should be taken into account
Shall be measured
FV
Subsequent Measurement
Contingent Liability
@ Higher of 2 amts (Par56)
Derecognise when Subsidiary recognises the Contingent on their separate AFS, Unless double accounting
Contingent consideration
R.E at acquisition
Contingent Liabilities