Summary of IFRS-3

IFRS 3 ---Business Combinations

A business combination is a transaction or event in which an acquirer obtains control of one or more businesses.. A business is defined as an integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing a return directly to investors or other owners, members or participants Acquirer must be identified. Under IFRS 3, an acquirer must be identified for all business combinations

Acquisition method. The acquisition method (called the 'purchase method' in the 2004 version of IFRS 3) is used for all business combinations.

Steps in applying the acquisition method are:

1. Identification of the 'acquirer' - the combining entity that obtains control of the acquiree.

2. Determination of the 'acquisition date' - the date on which the acquirer obtains control of the acquiree.

3. Recognition and measurement of the identifiable assets acquired, the liabilities assumed and any non-controlling interest (NCI, formerly called minority interest) in the acquiree.

4. Recognition and measurement of goodwill or a gain from a bargain purchase option.

Measurement of acquired assets and liabilities. Assets and liabilities are measured at their acquisition-date fair value (with a limited number of specified exceptions).

Goodwill

Goodwill is measured as the difference between: the aggregate of (i) the acquisition-date fair value of the consideration transferred, (ii) the amount of any NCI, and (iii) in a business combination achieved in stages , the acquisition-date fair value of the acquirer's previously-held equity interest in the acquiree; and the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed (measured in accordance with IFRS 3). If the difference above is negative, the resulting gain is recognised as a bargain purchase in profit or loss.