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THE GROUPSL. NAME ID
01. MOIN UDDIN REZA 16-104
02. REAJMIN SULTANA 16-119
03. MD. TANVIR HOSSAIN 16-147
04. ARIFA TUN NAIM 16-153
05. SUBARNA GOSWAMI 16-139
06. MD. MOHITUL ISLAM 16-253
07. TAHSIN NAZIM 16-106
08. AZIZA AKHTER 16-136
09. HASINA BEGUM 16-116
10. MAHMUDUL HASAN 16-159
IAS IFRS
IASC IAS
1973-2011
IASB IFRS
2011- ON WARDS
SHAPING THE CONCEPT
IFRS 3 IAS 27
BUSINESS COMBINATION
1. A B C2. A B 3. A B
(Cons.)
CONSOLIDATION
IFRS 3 VS. IAS 27
BUSINESS
COMBINATION
IFRS 3
Business combination The bringing together of separate entities or
business into one reporting entity.
Parent : an entity that has one or more subsidiaries
Subsidiary : an entity including an unincorporated entity that is controlled by another entity.
Method followed by business combination :
All business combinations must be accounted by applying the purchase method which involves 3 steps:
Identifying and acquirer Measuring the cost of business
combinationAllocation the cost of business
combination.
PURCHASE METHOD OF ACCOUNTING
1. •Identifying the acquirer
2. •Measuring the cost of business combination
3. •Allocating the cost of business combination
IDENTIFYING THE ACQUIRER
THE ACQUIRER
SHOULD BE IDENTIFIED
FOR ALL BUSINESS
COMBINATION
Control also exists when P has power:
Over a majority of the voting
rights
To appoint or remove board of directors
To cast the majority
votes
To govern the financial & operating
policies
The entity has greater fair value
The entity giving up the cash or other assets
Select the management team
ADITIONAL INDICATORS
COST OF BUSINESS COMBINATION
1.Total fair
values of the
considerati-on given.
2. Directl
y attribut
able cost
Cost of busines
s combina-tion
FAIR VALUE CONSIDERATION
FAIR VALUE
CONSID-ERATION
Deferred consideratio
n
1. Should be valued at discounted present value
2. For marketable securities, market values at the
acquisition date.
Contingent consideration
1. Depends on uncertain future events.
2. IAS 37 provisions(contingent assets & liabilities) are
applied.3. Assessment base is accounting
estimate not accounting policy.
Proceeds…
Directly Attributable Cost
1. Must be included in the cost of combination. e.g.
professional fees, legal costs etc.
2. Should not include general administrative cost & internal
cost(staff cost).3. Financial liabilities(e.g. loans)
& equity issue costs are deducted from liability/equity.
ALLOCATING THE COST OF COMBINATION
The acquiree’s identifiable assets, liabilities & contingent liabilities should be recognized at the fair value at the date of acquisition.
HOW TO IDENTIFIY NET ASSET ACQUIRED?Assets
ot
her t
han i
nt
angi
bl
e
asset
s
Liabilities other than contingent liabilities
Intangible assets
Contingent liabilities
HOW TO RECOGNIZE LIABILITIES?
An acquirer may only recognize acquirees liabilities if they exist at the acquisition date if
BFRS prohibits any accounts being taken at the time of two factors:
Reorganiza-tion
plans
Future
losses
RECOGNITION OF INTANGIBLE ASSETS
Arise from contractual or legal rightsSeparable
SEPARABLE ASSETS
Database
Non-contractu
al customer relations
hip
Customer list
Assets Arising from Contractual Or Legal Rights
TrademarksInternet Domain NamesNewspaper MastheadsLeasesComputer SoftwareLicense to broadcast TV or Radio programs
CONTINGENT LIABILITIES
Contingent Liabilities are recognized when it is reliably measurable. But it will not be recognized in the Balance Sheet of Acquiree .
CONSEQUENCES OF RECOGNITION AT FAIR VALUE
Acquirer’s consolidated income statement must include the acquiree ’s profit and loss.
Fair value of the acquiree ’s net asset in the consolidated financial statement are not incorporated into the acquire- e’s single entity Financial statement.
Any minority interest in the acquiree is based on the minority interest share of the net asset at their fair values.
GOODWILL AT ACQUISITION
ANY GOODWILL CARRIED IN THE ACQUIREE’S BALANCE SHEET BECOMES SUBSUMED IN THE GOODWILL ARISING ON ACQUISITION
GOODWILL
Goodwill Subsequent To Acquisition:After initial recognition, goodwill should be:
1. Carried in the balance sheet at cost less accumulated impairment losses
2. Tested for impairment at least annually
DISCOUNT ON ACQUISITION
Discount arises because:I. Errors in the
measurementII.Errors in cost of
combination
Action needed to resolve: Reassess the measurement &
identification of the net assetThe measurement of the cost of
combinationChecking whether fair value reflect
the arising future cost correctly
INITIAL ACCOUNTING
Initial accounting is the process of identifying & determining the fair values of:
The acquiree’s identifiable assets liabilities and contingent liabilities
Cost of combination
At the end of the accounting period in which the combination is effected, only provisional value can be established.
In cases of valuation of non-current assets: Provisional value Adjustments Comparative figure
FAIR VALUE ADJUSTMENTS
Consolidated Balance SheetConsolidated Income Statement
WORKED OUT PROBLEM
P S BUT, FV OF PPEDEPRECIATION
60% 1ST JULY, 2002
NET ASSET 5000
1 000 HIGHER THAN CARRYING AMOUNT
NET ASSET 10000
30 JUNE, 2005
10 YEARS
8 000
SOLUTION
1. NET ASSETS & POST ACQUISITION RESERVE:
ACQUISITION BALANCE POST
DATE DATE ACQUISITON
NET ASSET 5000 10000 5000
PPE FAIR VALUE UPLIFT 1000 1000 0
DEP. -3 YRS= 30% 0 (300) (300)
6000 10700 4700
* P LTD’S SHARE- 60% 2820
2. GOODWILL: COST OF SHARE
8000 SHARE OF NET ASSET
(3600)
= 4400
3.DEPRICIATION: ADDITIONAL CHARGE (1000* 10%) =
100
SELF TEST
1. IFRS 3 permits a company to
A. Amortize goodwill over its useful life B. Write off immediately and amortize
goodwill relating to different acquisition. C. Revalue goodwill upwards D. Restate goodwill at acquisition as a result
of adjustment to values within one year of
the acquisition date.
2. Sovon F. LTD acquires the following during the year ended 30 june, 2006
a. the separable net assets of Basic ltd, a sole trader.
b. 100% of the share capital of yung.cho ltd.In accordance to IFRS 3, goodwill may arise in Sovon
F. ltd’s own financial statements in respect of
A. Basic ltd & Yung.cho ltd C. Yung.cho ltd B. Basic ltd D. neither Basic nor
Yung
THANK YOU