Fair Value of Tangible Assets

In the event of Business Combinations tangible assets (current – Non-current) are best valued with the market or income approaches. If adequate data are not available to derive an indication of value through these methods, an appraiser may use the replacement cost method, which adjusts the original cost for changes in the price level to determine its current replacement cost. The current replacement cost is then adjusted due to physical use or functional obsolescence.

Property, Plant and EquipmentContinue reading

Assets with uncertain cash flows (valuation allowances)

The acquirer shall not recognise a separate valuation allowance as of the acquisition date for assets acquired in a business combination that are measured at their acquisition-date fair values because the effects of uncertainty about future cash flows are included in the fair value Business Combinations requires the acquirer to measure acquired receivables, including loans, at their acquisition-date fair values in accounting for a business combination, the acquirer does … Continue reading

Reacquired rights

As part of a business combination, an acquirer may reacquire a right that it had previously granted to the acquiree to use one or more of the acquirer’s recognised or unrecognised assets. Examples of such rights include a right to use the acquirer’s trade name under a franchise agreement or a right to use the acquirer’s technology under a technology licensing agreement. A reacquired right is an identifiable intangible Continue reading

Technology-based intangible assets – Other technology

In a Business Combinations, this is a intangible asset and is therefore recognised separately from goodwill, provided that its fair value can be measured reliably. This customer-related intangible asset does not arise from contractual or other legal rights, but meets the definition of an intangible asset because it is separable.

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Technology-based intangible assets – Legal titles and secrets

In a Business Combinations, these –by definition– are intangible assets and are therefore recognised separately from goodwill, provided that their fair values can be measured reliably. These intangible assets meet the definition of an intangible asset because they again –by definition– arise from contractual or other legal rights.… Continue reading

Contract-based intangible assets

In a Business Combinations, these –by definition– are intangible assets and are therefore recognised separately from goodwill, provided that their fair values can be measured reliably. These intangible assets meet the definition of an intangible asset because they again –by definition– arise from contractual or other legal rights.

Self explanatory examples are:

  1. Licensing, royalty and standstill agreements
  2. Advertising, construction, management, service or supply contracts
  3. Lease agreements
  4. Construction permits
  5. Franchise agreements
  6. Operating and broadcasting rights
  7. Use rights such as drilling,
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Artistic-related intangible assets

In a Business Combinations, these are intangible assets and are therefore recognised separately from goodwill, provided that their fair values can be measured reliably. These artistic-related intangible assets meet the definition of an intangible asset because they arise from contractual or other legal rights.

Artistic-related assets acquired in a business combination meet the criteria for identification as intangible assets if they arise from contractual or legal rights such as those provided by copyright. Copyrights can be transferred either in … Continue reading

Non-contractual customer relationships

In a Business Combinations, this is a intangible asset and is therefore recognised separately from goodwill, provided that its fair value can be measured reliably. This customer-related intangible asset does not arise from contractual or other legal rights, but meets the definition of an intangible asset because it is separable.

If a customer relationship acquired in a business combination does not arise from a contract, the relationship is an intangible asset if it meets the separability criterion. Exchange transactions for … Continue reading

Customer contracts and the related customer relationships

In a Business Combinations, these are intangible assets and are therefore recognised separately from goodwill, provided that their fair values can be measured reliably. These marketing-related intangible assets meet the definition of an intangible asset because they arise from contractual or other legal rights.

If an entity establishes relationships with its customers through contracts, those customer relationships arise from contractual rights. Therefore, customer contracts and the related customer relationships acquired in a business combination meet the contractual-legal criterion for … Continue reading