Customer relationships valuation

References:

Customer contracts and the related customer relationships
Non-contractual customer relationships
Order or production backlog

Introduction

Here a valuation model is presented to value customer contracts and the related customer relationship and the non-contractual customer relationships, as per IFRS 3 Business Combinations.

What are the inputs?

Revenue – represents revenue from existing customer relationships for existing products. Includes contractual and non-contractual relationships (even those without current backlog or commitments). Separate valuation of a backlog revenue intangible asset can be considered if and when such backlog exists.… Read more

IAS 38 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 the same asset or a similar asset provide evidence of separability of a non-contractual customer relationship and might also provide information about exchange prices that should be considered when estimating fair value.

There are valuation models to … Read more

Investments in Joint Ventures – Overview

An entity with joint control of an investee shall account for its investment in a joint venture using the equity method except when that investment qualifies for exemption in IAS 28.

The exemptions include: IAS 28 Investments in Joint Ventures – Overview

  • if the entity is a parent that is exempt from preparing consolidated financial statements by the scope exception in paragraphs 4(a) of IFRS 10 Consolidated Financial Statements; or
  • all of the following apply:
    1. the entity is a wholly-owned subsidiary, or is a partially-owned subsidiary of another entity and its other owners, including those not otherwise entitled to vote, have been informed about, and do not object to, the entity not applying the equity method;
    2. the entity’s
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Investments in Associates – Highlights

Just as a starter, two definitions!

Associate: An entity, including an unincorporated entity such as a partnership, over which an investor has significant influence and which is neither a subsidiary nor an interest in a joint venture.

Significant influence: The power to participate in the financial and operating policy decisions of the investee but it is not control or joint control over those policies.… Read more

Identify and separate Intangible assets

The acquirer recognises, separately from goodwill, the identifiable intangible assets acquired in a business combination. An intangible asset is identifiable if it meets either the separability criterion or the contractual-legal criterion. Identify and separate Intangible assets Identify and separate Intangible assets

An intangible asset that meets the contractual-legal criterion is identifiable even if the asset is not transferable or separable from the acquiree or from other rights and obligations. For example:… Read more

Business Combinations and Goodwill

Introduction Business Combinations and Goodwill

19.1 Business Combinations and Goodwill applies to accounting for business combinations. It provides guidance on identifying the acquirer, measuring the cost of the business combination and allocating that cost to the assets acquired and liabilities and provisions for contingent liabilities assumed. It also addresses accounting for goodwill both at the time of a business combination and subsequently.

Business Combinations and Goodwill – Exceptions

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