IFRS 2 Fair value of equity instruments granted

IFRS 2 Fair value of equity instruments granted – Share-based payment transactions with employees are measured with reference to the fair value of the equity instruments granted (IFRS 2.11).

The fair value of a equity instrument granted is determined as follows (IFRS 2.16-17):

  • If market prices are available for the actual equity instruments granted – i.e. shares or share options with the same terms and conditions – then the estimate of fair value is based on these market prices. IFRS 2 Fair value of equity instruments granted
  • If market prices are not available for the equity instruments granted, then the fair value of equity instruments granted is estimated using a valuation technique.

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Combined financial statements

Combined financial statements: represents the combination of two or more legal entities or businesses that may or may not be part of the same group, but do not by themselves meet the definition of a group under IFRS 10 Consolidated Financial Statements – i.e. a parent and all of its subsidiaries. At a simplistic level, preparing combined financial statements involves adding together two or more legal entities and eliminating any inter-company transactions – e.g. intercompany profits, revenue and expenses, receivables and payables and equity (e.g. unrealised gains and losses).

Combined financial statements Combined financial statements Combined financial statements Combined financial statements Combined financial statements Combined financial statements Combined financial statements Combined financial statements Combined financial statements Combined financial statements Combined financial statements Combined financial statements



These activities are typically under common control, BUT do not comprise an existing legal entity or group and are presented as a single reporting entity.

For some combined financial … Read more

High level overview IFRS 3 Business Combinations


Scope High level overview IFRS 3 Business Combinations

IFRS 3 does not apply to:

  • The accounting for the formation of a joint arrangement in the financial statements of the joint arrangement itself.
  • Acquisition of an asset or group of assets that is not a business.
  • A combination of entities or businesses under common control.


A business combination is: A transaction or event in which acquirer obtains control over a business (e.g. acquisition of shares or net assets, legal mergers, reverse acquisitions).

Definition of a “Business”

A business is:

  • Integrated set of activities and assets
  • Capable of being conducted and managed to provide return
  • Returns include dividends and cost savings.

High level overview IFRS 3 Business Combinations High level overview Read more

11 Best fair value measurements under IFRS 13

11 Best fair value measurements under IFRS 13 – Several IFRS standards provide guidance regarding the scope and application of the fair value option for assets and liabilities. Here they are from 1 to 11…….

1 Investments in associates and joint ventures

Investments held by venture capital organizations and the like are exempt from IAS 28’s requirements only when they are measured at fair value through profit or loss in accordance with IFRS 9. Changes in the fair value of such investments are recognized in profit or loss in the period of change.

The IASB acknowledged that fair value information is often readily available in venture capital organizations and entities in similar industries, even for start-up and non-listed entities, as … Read more

IAS 32 Clearly distinguishing liability and equity

IAS 32 Clearly distinguishing liability and equity – When an entity issues a financial instrument, it must determine its classification either as a liability (debt) or as equity. That determination has an immediate and significant effect on the entity’s reported results and financial position. Liability classification affects an entity’s gearing ratios and typically results in any payments being treated as interest and charged to earnings.

Equity classification avoids these impacts but may be perceived negatively by investors if it is seen as diluting their existing equity interests. Understanding the classification process and its effects is therefore a critical issue for management and must be kept in mind when evaluating alternative financing options.

IAS 32 Financial Instruments: Presentation addresses this classification … Read more

Valuation of unquoted equity instruments

Valuation of unquoted equity instruments – The three valuation approaches and techniques described in IFRS 13 are: Valuation of unquoted equity instruments

IFRS 13  does not prescribe a specific valuation technique, but encourages the use of professional judgment together with consideration of all facts and circumstances surrounding the measurement. These three different valuation approaches could be applied in determining the fair value of an unquoted equity instrument. However, regardless of the valuation technique used, the fair value measurement of those equity instruments must reflect market conditions at the investor’s reporting date.

Market approach

The market approach uses prices and other relevant information generated by market transactions involving identical or comparable … Read more

Consolidated financial statements

IFRS 10 Definition of consolidated financial statements

The financial statements of a group in which the assets, liabilities, equity, income, expenses and cash flows of the parent and its subsidiaries are presented as those of a single economic entity.

ParentAn entity that controls one or more entities.

The other types of financial statements are unconsolidated financial statements (or company accounts) and combined financial statements.

Single economic entity concept

The concept of a single economic entity is illustrated in the example below:

Example – Single economic entity concept

A subsidiary buys an asset from a third party for CU 100. It subsequently sells the asset on to its parent for CU 130. The subsidiary records a profit

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Indemnification assets

Indemnification assets – Dictionary meaning of Indemnification is ‘indemnification is the part of an agreement that provides for one party to bear the monetary costs, either directly or by reimbursement, for losses incurred by a second party’.

Indemnification of an asset essentially provides kind of guarantee to the other party about the downside of any risk associated with such asset/ liability. On broader perspective such indemnification could be against any asset/ liability or part thereof while making Business combinations under IFRS 3. Indemnification assets are recognised and measured, separately from goodwill, as at the acquisition date as part of the recognition and measurement of identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree.

Indemnification assets are … Read more


Shares are financial instruments. A share is a certificate evidencing the rights of the shareholder, to whom it is granted, in a company. Shares may take bearer or registered form. One share of stock represents a fraction of the share capital of a corporation.

Shares to be issued – Shares for which consideration has been received but which are not issued yet.

Ordinary sharesAn ordinary share is an equity instrument that is subordinate to all other classes of equity instruments.

Potential ordinary shares – A potential ordinary share is a financial instrument or other contract that may entitle its holder to ordinary shares. Examples of potential ordinary shares include:

  • financial liabilities or equity instruments, including preference shares, that
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