Reporting dates and consistent accounting policies

Chapter 33 – Business Combinations Page 436 Illustration 10 Assuming the same facts as in Illustration 7 and that goodwill in the acquisition was measured at CU4.8 million. The finalisation of the fair value of the trademarks will result in an increase in their carrying amount at the acquisition date of CU100,000, so goodwill should be reduced by the same amount. The 2007 comparative figures in the 2008 financial statements should be restated by these amounts. Note also that the 2007 amortisation should be increased by CU5,000 CU100,00010 years × 612months and the 2007 profit reduced or loss increased by the same amount. 9 Disclosures A business combination may result in substantial changes to both the nature of a group and its performance in future periods. IFRS 3, therefore, requires the disclosure of information to assist in a user’s understanding of the nature and financial effect of a business combination that occurs either during the current reporting period or after the end of the reporting period but before the financial statements are authorised for issue. [IFRS 3.59] In addition, information should be disclosed so that users of the financial statements are able to evaluate the financial effect of adjustments made in the current reporting period in respect of business combinations that took place in the current or previous reporting periods. [IFRS 3.61] To meet the objective of these disclosures, IFRS 3 sets out detailed requirements in the Application Guidance accompanying it. If these specific disclosures do not meet the objectives set out above, then an entity should provide additional information. The first group of disclosures has the objective of requiring information about combinations that occurred during the period. The name and a description of an acquiree should be presented along with the acquisition date, the percentage of voting equity acquired and the consideration transferred. The consideration transferred should be broken down into its various elements, for example cash and the issue of shares. A narrative explanation is required to explain the reason for the business combination, the factors that make up goodwill and any intangible assets that did not qualify for separate recognition. More detailed disclosures are required in respect of any contingent consideration and indemnification assets. Ongoing disclosures are also required in relation to the continuing existence of contingent consideration. The amounts recognised as at the acquisition date for each major class of assets acquired and liabilities assumed should be disclosed. If a gain on a bargain purchase was achieved on the acquisition, the amount recognised in profit or loss should be clearly identified and a description of why a gain was achieved. Where less than 100 per cent ownership has been acquired in a business combination, the amount of the non-controlling interest in the acquiree at the acquisition date should be disclosed, together with the measurement basis used. If fair value is used, then the valuation techniques should also be disclosed. The amounts of the acquiree’s revenue and profit or loss included in the consolidated statement of comprehensive income in the year of acquisition should be disclosed, together with the revenue and profit or loss which would have been included if the acquisition dates of all the business combinations during the period had been the first day of the period. Where a