International Financial Reporting Standards_guide.pdf

64 Chapter 6 Business Combinations (IFRS 3)
combination using provisional amounts. During the measurement period (12 months from
the date of acquisition), the acquirer should retrospectively adjust these provisional amounts
to reflect new information obtained about the facts and circumstances that existed at acquisition.
Measurement period adjustments include all the following situations:
■ Provisional accounting was applied in measuring the fair values of the net assets and
subsequently more reliable fair values are established that would have been used at acquisition
had they been known.
■ Assets and liabilities of the acquiree were not recognized at acquisition as they did not
meet the recognition criteria and subsequent information obtained reveals that they did
in fact meet the criteria.
■ Deferred tax assets that arose at acquisition date were not recognized as it did not
appear there would be adequate future taxable profits and subsequent information
obtained reveals that future taxable profits are probable and this criteria was met at
acquisition.
■ Adjustments to contingent consideration recognized in combinations before July 1,
2009 for which the contingency is settled in a reporting period after this date.
If any of the above adjustments are required within the measurement period, they shall be
made retrospectively to the relevant assets and liabilities with the contra entry against goodwill.
Subsequent to the measurement period, any required adjustments are not made against
goodwill and must be taken through profit or loss.
Measuring Consideration, Non-Controlling Interest, and Goodwill
6.4.16 The consideration transferred by the acquirer is the aggregate of the acquisition-date
fair values of any assets transferred, liabilities incurred, and equity instruments issued by
the acquirer in exchange for control over the acquiree. Acquisition-related costs are not included
as part of the consideration transferred but are expensed through profit or loss when
incurred.
6.4.17 If there is a contingent consideration arrangement as part of the acquisition, the fair
value of any contingent consideration must be included as part of consideration at acquisition
date. At the same time the acquirer must recognize in its own financial statements, a
contingent consideration asset, liability, or equity item in terms of the requirements and
definitions of IAS 32, IAS 39, and IAS 37. Any subsequent fair value movements in the contingent
consideration are not taken against goodwill but recognized as profit or loss, except
for an equity item which is not adjusted for fair value changes after initial recognition. On
settlement of the contingent consideration, the asset, liability, or equity item is derecognized
and the amount paid or received recognized. If the contingency never occurs, and settlement
is not required, the item is derecognized in full against profit or loss.