IMMOEAST Annual Report 2006/07

the measurement of the cost of the business combination and the allocation of the cost of the business combination
to the assets acquired and liabilities and contingent liabilities assumed on the acquisition date. The acquirer is the
combining entity that obtains control of the other combining entities or businesses. This method calls for the elimination
of the investment and equity at the acquisition date through the offset of the purchase price with the revalued
proportional share of net assets in the acquired company. All identifiable assets, liabilities and contingent liabilities
of the subsidiary are stated at their full fair value, independent of any minority interest. Major exceptions to the
mandatory recognition of assets and liabilities at fair value include deferred tax assets for deferred tax liabilities as
well as assets or groups of assets that fall under IFRS 5 Non-current assets held for sale and discontinued operations.
Intangible assets must be shown separately from goodwill, if their fair value can be reliably determined and
if they are identifiable. According to IFRS 3.46, this latter criterion is met when the assets are separable from the
company or result from a contractual or other right. When the purchase method is applied, the acquirer is not permitted
to create provisions for future losses or expected restructuring expenses that may result from the business
combination.
Goodwill is recognised by the acquirer as an asset on the acquisition date and initially measured as the excess of the
cost of the business combination over the acquirer’s interest in the net fair value of the of the identifiable assets,
liabilities and contingent liabilities of the acquired entity. If the acquirer’s interest in the fair value of acquired identifiable
net assets exceeds the cost of the business combination, this difference – negative goodwill – is recognised
immediately to profit or loss under other operating income after the reassessment of the remeasurement as required
by IFRS 3.56 (a).
In accordance with IFRS 3 in connection with IAS 36, capitalised goodwill is no longer amortised on a regular basis,
but is tested for impairment each year or on an interim basis if there are signs of a loss in value. If the carrying value
of a cash-generating unit (CGU) to which goodwill has been allocated should fall below its recoverable amount,
goodwill is reduced by the amount of the difference through an impairment charge. Any remaining difference will be
reflected in a proportional reduction of the carrying value of the other non-current assets.
A business combination may involve more than one purchase transaction, e.g. when it occurs in stages by successive
share purchases. In this case each transaction must be treated separately by the acquirer, whereby the cost of the
transaction and fair value information at the date of each exchange transaction are used to determine the amount
of any goodwill associated with that transaction. The shift between the previous minority interest and the offset of
capital from a step acquisition is shown as a structural change on the statement of changes in equity. For business
combinations that result in a proportional share of equity below 100%, the increase in minority interest is reported
as an addition to the consolidation range on the statement of changes in equity. In accordance with the economic
unity principle that is anchored in IAS 27.4 and IAS 1.68 (o), minority interests are presented as a separate position
under equity.
IFRS 3 and IAS 27 do not directly regulate the determination of indirect minority interests. In accordance with the
economic unity principle, the consolidated financial statements of IMMOEAST include only indirect minority interests
in the earned equity of consolidated subsidiaries. In keeping with the prevalent opinion expressed in accounting
literature, indirect minority interests are treated in line with the economic unity principle and not taken into account
in the consolidation, which is therefore based on the direct stake owned in the subsidiary. This leads to the determination
of goodwill that is secured through cash outflows and meets the conceptual criteria for complete revaluation
that are expressed in IFRS 3.
The financial statements of all companies included in the consolidation are based on the same balance sheet date
as the parent company. If the balance sheet dates are different, the relevant subsidiaries prepare interim financial
Notes
Report by the Executive Board 119
Highlights 2006/07
Business Model and Strategy
Portfolio Structure
Corporate Governance and Outlook
Property Portfolio
Development of Business
Consolidated Financial Statements
Service and Glossary
IFRS 3.17
IFRS 3.36 in
connection
with IFRS 3.37
IFRS 3.37(c)
IFRS 3.46
IFRS 3.41
(a), (b)
IFRS 3.51 in
connection
with IFRS 3.56
IFRS 3.54
IFRS 3.58
IAS 27.4 in
connection
with IAS 1.68
(o) (o)
IAS 27.26
IAS 27.27