26.11 International Financial Reporting Standards

IFRS 3, Business combinations, covers

• The method of accounting for business combinations;

• Initial measurement of assets and liabilities acquired and assumed;

• Liabilities for terminating or reducing the acquiree's activities;

• The treatment of "negative goodwill";

• Accounting for goodwill.

IFRS 3 requires an entity to:

• Account for all business combinations within its scope by the purchase method;

• Identify an acquirer;

• Measure the cost of the business combination as the aggregate of the fair values of assets given less liabilities incurred plus the fair value of equity instruments issued plus any directly attributable costs;

• Recognize separately and measure initially at fair value, at the acquisition date the acquiree's identifiable assets, liabilities and contingent liabilities that satisfy specified recognition criteria as at that date (regardless of whether they had been previously recognized in the acquiree's financial statements);

• Recognize goodwill acquired in a business combination as an asset from the balance sheet date;

• Prohibits the amortization of goodwill acquired in a business combination, but requires such goodwill to be tested for impairment annually (or more frequently in certain circumstances);

• Where the acquirer's interest in the net fair value of the items recognized exceeds the cost of the combination (i.e. "negative goodwill"), requires the acquirer to reassess the identification and measurement of the relevant items and to recognize immediately within profit or loss any excess then remaining;

• Disclose comprehensive information to enable users of the financial statements to make certain key evaluations, for example of changes in the carrying value...