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Wiley IFRS: Practical Implementation Guide and Workbook
(8) The amount of the acquiree ' s profit or loss since acquisition that has been included in the
acquirer' s profit or loss for the period, unless this is, again, impracticable
(9) The revenue of the combined entity for the period, as if the combination had occurred at
the beginning of that period
(l0) The profit or loss of the combined entity for the period as if the combination had been ef-
fected at the beginning of the period
10,
RECENT AMENDMENTS TO IFRS 3 EFFECTIVE FOR ANNUAL PERIODS
BEGINNING ON OR AFTER JULY
1,2009
10,1
On January 8, 2008, the IASB published revised IFRS 3 and lAS 27. The revised IASB
standards were the result of a joint project with the US Financial Accounting Standards Board
(FASB) . FASB also issued similar standards in December 2007 (SFAS 141[R] and SFAS 160). It
is interesting to note, that while these revised IASB standards were born out of the IASB' s joint
convergence project with the FASB, there still remain a few fundamental differences between the
revised FASB standard, SFAS 141(R), and the revised IFRS 3, for instance, while it is an
option
under the revised IFRS 3 to use the "full goodwill method" (explained later) the FASB standard,
SFAS 141(R),
require s it
(as opposed to
permitting it).
10,2 IFRS 3 (revised 2008) has significantly enhanced the use of fair values (involving grater
input from valuation experts). This revised Standard has introduced the requirement of recognizing
change in control as a significant economic event requiring (or triggering) remeasuring interests to
fair value at the time when
control
is
achieved or lost
and recognizing in equity all transactions
between controlling and noncontrolling shareholders not involving a loss of control. It also focuses
on what is given to the seller as consideration as opposed to what is spent on achieving acquisition.
10,3
Set out below is an overview of the major amendments to IFRS 3.
I. Acquisition-related costs, While costs associated with issuance of debt or equity in–
struments are accounted for under lAS 39, all other costs of acquisition (i.e., finder's
fees, legal, and advisory costs and general and administrative costs, including the cost
of maintaining an "in-house" acquisitions department) must be
expensed;
this includes
reimbursements to the acquiree for bearing some of the cost of acquisition.
2. Step acquisitions, Business combination requiring acquisition accounting is triggered
only at the point of attaining control in the acquiree. It has different implications de–
pending upon whether the acquirer has a preexisting equity interest in the acquiree (in
which case, prior to attaining control in the acquiree, the equity interest in the acquiree
may be accounted for either as a financial asset in accordance with lAS 39, or as an as–
sociate under lAS 28, or as a joint venture under lAS 31, as appropriate), subsequently,
upon further increase in equity interest in the acquiree
in stages,
once the equity own–
ership in the acquiree reaches the (trigger) point when control is achieved, the acquirer
must remeasure its previously held equity interest in the acquiree at fair value on the
acquisition date and recognize the resulting gain or loss, if any, in profit or loss. Once
control is attained in the acquiree, all further increases and decreases in equity interests
are treated as transactions among equity holders and reported within equity (neither
goodwill arises on any increase in equity interest, nor is any gain or loss recognized on
any decrease in equity interest).
3. Noncontrolling interest (under the existing version of IFRS 3 referred to as
"minority interest"). In a much talked-about departure from its earlier stand taken in
the Exposure Draft on this subject, the ASB issued IFRS 3 (revised 2008) allowing an
option,
available on a transaction-by-transaction basis, to measure any noncontrolling
interest (NCI) in the acquiree either at fair value or at the NC!' s proportionate share of
the net identifiable assets of the entity acquired.
(In the current version of [FRS
3
the
latter treatment corresponds to the measurement basis .)
4. Contingent consideration payable on business combination. All consideration for
the acquisition must be measured at fair value and that includes contingent considera–
tion payable. Once recognized, IFRS 3 (revised 2008), permits a few changes to this
measurement as a result of any postacquisition events
unless those result from addi-