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Chapter
35 /
Business Combinations (IFRS 3)
411
tional information about fa cts and circumstances that existed at the date of business
combination.
All other changes (say, change s resulting from postacquisition events
such as the acquiree meeting a certain earnings target, or achieving a milestone such as
on postacquisition significant cost reduction) are recognized in profit or loss,
(Under
the existing version of [FRS
3
subsequent adj ustments resulting fro m contingent con–
sideration are possible and are adj usted against goodwill or equity.)
5. Preexisting r elati onships and r eacquired ri gh ts. If the parties to the business com–
bination had a preexisting relationship (say, the acquiree had contracted with the ac–
quirer to use certain intellectual property rights owned by the acquirer on the date of
the business combination), this must be accounted for separately from the accounting
for the business combination. The accounting treatment of such a preexisting relation–
ship would depend upon
a. Whether the preexisting relationship arose from a contractual right, in which case
the gain or loss is measured at the
lesser of
(I )
the favorable/unfavorable contract
position and (2) any stated settlement provis ions in the contract available to the
counterparty to whom the contract is unfavorab le; or
b. Whether the preexisting relationship arose from a noncontractual right (say a law-
suit), in which case, by reference to fair value.
If the transaction effectively represents a reacquired right, an intangible asset is recog–
nized and measured on the basis of the remaining contractual term of the related con–
tract (excluding any renewals). The asset is subsequently amortized over the remain–
ing contractual term, excl uding any renewa ls.
6. Goodwill: The acquirer accounts for goodwill at the date of acquisition measured as a
differenc e between
a. The aggregate of
( I) The fair value on the acquisition date of the consideration transferred ;
(2) The amount of any noncontrollin g interest (NCI) in the acquiree; and
(3) In case of a "business combination achieved in stages," the acquisition-date
fair value of the acquiree' s previously held equity interest in the acquiree;
and
b. The net of the acquisition-date amounts of the identifiable assets acquired and the
acquired liabilities assumed, both measured in accordanc e with the provisions of
IFRS 3 (revised).
11.
EFFECTIVE DATE AND TRANS ITIONAL REQUIREMENTS
The recently promulgated IFRS 3 (revised 2008) and lAS 27 (revised 2008 ) must be
applied to annual periods beginn ing on or after Jul y I, 2009. Early adopti on is permitted
provided
• Both Standards are applied together;
• The revised IFRS 3 is not applied in an accounting period begin ning before June 30,
2007; and
• Early adopt ion of the Standards is disclosed.
12.
EXTRACTS FROM PUBLISHED FINANCIAL STATEMENTS
12.1 AHOLD Annual Report 2006
Notes to the Consolidated Financial Statements
Note 4. Acquisition
2006 Acquisitions
Clemens
On October 30, 2006, Ahold completed the acquisition of 14 stores from Clemen s Market Inc.,
of which 13 were subsequently converted to Giant Food Stores while one store continued to be op–
erated under the existing Foodsource banner.