BUSINESS COMBINATION Acquisition Date

The date in which the acquirer obtains control over the acquiree.
Prevailing Standard: IFRS 3 Generally the date on which the acquirer legally transfers the consideration, acquires
Business Combination the assets and assumes the liabilities of the acquiree- the closing date.
A transaction or other event in which an acquirer obtains control of one or more
Consideration Transferred to effect Combination (Purchase Price)
businesses. Transactions sometimes referred to as ‘true mergers’ or ‘mergers of
The consideration transferred in a business combination shall be measured at fair
equals’ are also business combinations as that term is used in this IFRS.
value, which shall be calculated as the sum of the acquisition date fair values of the
Acquisition Method assets transferred by the acquirer, the liabilities incurred by the acquirer to former
An entity shall account for each business combination by applying the Acquisition owners of the acquire and the equity interests issued by the acquirer.
Method:
Contingent Consideration
Step 1: Determining whether the transaction or event is a business combination
The consideration the acquirer transfers in exchange for the acquiree includes any
Step 2: Identify the acquirer
asset or liability resulting from a contingent consideration arrangement. The acquirer
Step 3: Determining the acquisition date shall recognize the acquisition-date fair value of the contingent consideration as part
Step 4: Recognizing and measuring the identifiable assets acquired, the liabilities of the consideration transferred in exchange for the acquiree.
assumed and any non-controlling interest in the acquirer
Step 5: Measuring consideration and determining what is part of the business Measurement Period
combination The period within which the acquirer shall finalize the acquisition-date fair values of
Step 6: Recognizing and measuring goodwill or a gain from a bargain purchase the assets acquired, liabilities assumed, and consideration transferred.
Step 7: Subsequent measurement and accounting It must not to exceed one year from the acquisition date.
Adjustments relating to the acquisition date fair values brought by information
Identifying the Acquirer determined during the measurement period shall be adjusted to goodwill or gain
Acquirer – the entity that obtains control of another entity recognized at acquisition date.
Existence of Control Acquisition-Related Costs
An investor controls an investee when is tis exposed, or has rights, to variable Accounted for as expenses; however, costs to issue debt or equity securities shall be
returns from its involvement with the investee and has the ability to affect those recognized in accordance with IAS 32 and IFRS 9.
returns through its power over the investee. The transaction costs of an equity transaction are accounted for as a deduction from
Control is the power to govern the financial and operating policies of an entity so as equity (net of any related income tax benefit) to the extent they are incremental
to obtain benefits from its activities. costs directly attributable to the equity transaction that otherwise would have been
Presumptions of Control avoided.
Control is generally presumed to exist when the parent owns, directly or indirectly
through subsidiaries, more than half of the voting power of an entity. Net Assets Acquired
As of the acquisition date, the acquirer shall recognize, separately from goodwill,
Special Case: Combinations effected by creating a new entity: the identifiable assets acquired, the liabilities assumed and any non-controlling
If new entity issues its equity instruments in exchange for equity instruments of the interest in the acquiree.
combining entities, then one of the combining entities must be identified as the The acquirer shall measure the identifiable assets acquired and the liabilities assumed
acquirer. at their acquisition-date fair values.
If the new entity transfers cash or other assets in exchange for equity instruments of Liabilities assumed shall include Contingent Liabilities.
the combining entities, then the NEW entity may be identified as the acquirer.

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Non-Controlling Interest (NCI) a. Contingent consideration classified a equity shall not be remeasured and its
For each business combination, the acquirer shall measure at he acquisition date subsequent settlement shall be accounted for within equity.
components of non-controlling interests in the acquiree that are present ownership b. Contingent consideration classified as an asset or a liability that:
interest and entitle their holders to proportionate share of the entity’s net assets in the i. Is a financial instrument and is within the scope of IFRS 9 or IAS 39 shall be
event of liquidation at either: measured at fair value, with any resulting gain or loss recognized either in
a. Fair value; or profit or loss or in other comprehensive income in accordance with IFRS 9.
b. The present ownership instruments’ proportionate share in the recognized ii. Is not within the scope of IFRS 9 shall be accounted for in accordance with
amounts of the acquiree’s identifiable net assets. IAS 37 or other IFRSs as appropriate.
All other components of non-controlling interests shall be measured at their Contingent Liabilities
acquisition-date fair values, unless another measurement basis is required by IFRS. Higher of:
a. The amount that would be recognized in accordance with IAS 37 (Provisions,
Fair Value of NCI
Contingent Liabilities, and Contingent Assets); and
Basis: b. The amount initially recognized less, if appropriate, cumulative amortization
a. Quoted price in an active market for the equity shares recognized in accordance with IAS 18 (Revenue)
b. Other valuation techniques (if no active market for the equity shares) Non-Controlling Interest
The fair values of the acquirer’s interest in the acquiree and the non-controlling Subsequently adjusted by the non-controlling interests’ share of changes in equity
interest on a per-share basis might differ primarily due to the inclusion of a control form the date of the combination.
premium in the per-share fair value of the acquirer’s interest in the acquiree.
Reacquired Rights
Goodwill and Gain Recognition and Measurement A reacquired right recognized as an intangible asset shall be amortized over the
Goodwill or gain shall be recognized as the difference of remaining contractual period of the contract in which the right was granted.
a. The aggregate of: Indemnification Assets
i. The consideration transferred measured in accordance with this IFRS, At the end of each subsequent reporting period, the acquirer shall measure an
which generally acquisition-date fair value indemnification asset that was recognized at the acquisition date on the same bases
ii. The amount of any non-controlling interest in the acquiree measured in as the indemnified liability or asset.
accordance with this IFRS; and
iii. In a business combination achieved in stages, the acquisition-date fair value --END--
of the acquirer’s previously held equity interest in the acquiree
b. The net of the acquisition-date amounts of the identifiable assets acquired
and the liabilities assumed measured in accordance with this IRFS.
Therefore,
Consideration Transferred xx
Non-Controlling Interest xx
Fair Value of Previously Held Equity Interest xx
Net Assets- Acquiree (xx)
Goodwill /( Bargain Purchase Gain) xx

Subsequent Measurement
Contingent Consideration
The acquirer shall account for changes for changes in the fair values of contingent
consideration that are not measurement period adjustments as follows:

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