section 19 business combination and goodwill 1

7/25/2019 Section 19 Business Combination and Goodwill 1

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Section 19

BusinessCombinations an

Goodwill


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19.3 Business Combination

Is the bringing together of separate entities or

businesses into one reporting entity. The result of ne

all business combinations is that one entity, the acqu

obtains control of one or more other business, the

acquiree. The acquisition date is the date on which tacquirer effectively obtains control of the acquiree.


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Exclusions

Combinations of entities or businesses undecommon control

The formation of a joint venture

Acquisition of a group of assets that do notconstitute a business


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19.8 The acquireris the combining entity tha

obtains control of the other combining entitor businesses.

19.9 Controlis the power to govern the finan

and operating policies of an entity or busine

so as to obtain benefits from its activities.


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19.6 All business combinations shall be acco

for by applying the purchase method.

19.7 Applying the purchase method involves

following steps:identifying an acquirer

measuring the cost of business combination

allocating the cost of business combination

assets acquired and liabilities and provision

contingent liabilities assumed.


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19.22 The acquirer shall, at the acquisition date:

recognie goodwill acquired in a business

combination as an asset

initially measure that goodwill at its cost, b

e!cess of the cost of the business combinatio

acquirer"s interest in the net fair value of the

identifiable assets, liabilities and contingent

recognied


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19.3 After initial recognition, the acquirer

shall measure goodwill acquired in a busin

combination at cost less accumulated

amortiation and accumulated impairment

losses


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19.25- 19.26 isclosu!es "o! businesscombinations#

The name and descriptions of the combining entiti

businesses and the acquisition date

The percentage of voting equity instruments acqui

The cost of combination and a description of the

components of that cost


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The amounts recognied at the acquisition date for

class of the acquiree"s assets, liabilities and contin

liabilities, including goodwill

The amount of any e!cess recognied in profit or l

A reconciliation of the carrying amount of goodwibeginning and end of the reporting period, showin

separately changes from new business combinatio

impairment losses, disposal and other changes.


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i$e!ences Between %ull &%'S and &%'S "o!

Full IFRS IFRS for SMEs

Transaction costs are e!pensed Transaction costs are includeacquisition cost

Contingent consideration is recogniedregardless of probability of payment

Included as part of cost if it pthe amount will be paid and ican be measured reliably

#oodwill is tested for impairment #oodwill is tested for impairmamortied over its useful life

$egative goodwill is recognied in profitor loss using the term %gain on bargainpurchase&

$egative goodwill is recogniprofit or loss


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&llust!ati)e Exam*le

'n () *une +)), A-C imited acquired ))/ of

ordinary share capital of 012 Inc., a fruit grower afruit juice producer for the wholesale mar3et opera

in southern 1uropean countries. The fair value of 0

Inc.4s assets and liabilities as of () *une +)) arisin

from the acquisition is 5,((6. The cost of thecontribution is made up as follows:

Cash 7aid 5,8)9

Transaction costs +)


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A purchased a competitor"s -; ta!i business forC


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'e"e!ence

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www.ica+.com,4le,&%'S"o!S(Es291.*d"

section 19 business combination and goodwill 1

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