What does IFRS 3 say?

The core principles in IFRS 3 are that an acquirer measures the cost of the acquisition at the fair value of the consideration paid; allocates that cost to the acquired identifiable assets and liabilities on the basis of their fair values; allocates the rest of the cost to goodwill; and recognises any excess of …

What is IFRS 3 in accounting?

IFRS 3 establishes the following principles in relation to the recognition and measurement of items arising in a business combination: Recognition principle. Identifiable assets acquired, liabilities assumed, and non-controlling interests in the acquiree, are recognised separately from goodwill [IFRS 3.10]

What is the purpose of IFRS 3?

What is the objective of IFRS 3? The objective of IFRS 3 Business Combinations is to improve the relevance, reliability and comparability of the information that a reporting entity provides in its financial statements about a business combination and its effects.

Who does IFRS 3 apply to?

IFRS 3 applies to all business combinations identified as such under IFRS 3 with the following three exceptions: the formation of a joint arrangement in the financial statements of the joint arrangement itself. a combination of entities or businesses under common control (referred to as common control combinations)

What is the third step in the acquisition method under IFRS 3?

The acquisition method

1. Step 1 – Identifying a business combination.
2. Step 2 – Identifying the acquirer.
3. Step 3 – Determining the acquisition date.
4. Step 4 – Recognising and measuring identifiable assets acquired and liabilities assumed.
5. Step 5 – Recognising and measuring any non-controlling interest (NCI)

What are types of goodwill?

There are two types of goodwill, Institutional (Enterprise) or Professional (Personal). Institutional goodwill may be described as the intangible value that would continue to inure to the business without the presence of specific owner.

Why do we not amortize goodwill?

Amortisation is a systematic allocation of value of asset over its useful life. It is extremely difficult to assign any life span to goodwill. Therefore no such method is yet devised which can amortise infinite life assets.

What is control in business combination?

A business combination under common control is a combination in which all of the combining companies or businesses are ultimately controlled by the same party(ies), both before and after the combination.

Is goodwill a fixed asset?

Goodwill is calculated and categorized as a fixed asset in the balance sheets of a business. From an accounting and fiscal point of view, the goodwill is not subject to amortization.

What is the difference between impairment and amortization?

Amortization is used to reflect the reduction in value of an intangible asset over its lifespan. Impairment occurs when an intangible asset is deemed less valuable than is stated on the balance sheet after amortization.