What happened in the reporting period

What happened in the reporting period

There is no requirement to disclose a summary of significant events and transactions that have affected the company’s financial position and performance during the period under review (or simply what happened in the reporting period). However, information such as this could help readers understand the entity’s performance and any changes to the entity’s financial position during the year and make it easier finding the relevant information. However, information such as this could also be provided in the (unaudited) operating and financial review rather than the (audited) notes to the financial statements.

Covid-19
At the time of writing, the biggest impact on the financial statements of entities all around the world is related to the COVID-19 pandemic. Most entities will be affected by this in one form or another and should discuss the impact prominently in their financial statements. However, as the events are still unfolding, this publication is not providing any illustrative examples or guidance. See how to account for Covid-19 to get an up-to-date discussion.

Going concern disclosures [IAS1.25]
When preparing financial statements, management shall make an assessment of an entity’s ability to continue as a going concern. Financial statements shall be prepared on a going concern basis unless management either intends to liquidate the entity or to cease trading, or has no realistic alternative but to do so.

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High level overview IFRS 3 Business Combinations

HIGH LEVEL OVERVIEW IFRS 3 BUSINESS COMBINATIONS

A summary on one page and more detail for reference

The overview

Scope & Identifying a business combination
A business combination is:
Transaction or event in which acquirer obtains control over a business (e.g. of shares or net assets, legal , reverse ).High level overview IFRS 3 Business Combinations High level overview IFRS 3 Business Combinations IFRS 3 Business Combinations
IFRS 3 does not apply to:
  • The accounting for the
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Leveraged buyout IFRS 3 best reporting

Leveraged buyout IFRS 3 best reporting – In corporate finance, a leveraged buyout (LBO) is a transaction where a company is acquired using debt as the main source of consideration. These transactions typically occur when a private equity (PE) firm borrows as much as they can from a variety of lenders (up to 70 or 80 percent of the purchase price) and funds the balance with their own equity. Leveraged buyout IFRS 3 best reporting

1 The process and business reason

The use of leverage (debt) enhances expected returns to the private equity firm. By putting in as little of their own money as possible, PE firms can achieve a large return on equity (ROE) and internal rate of return … Read more

IFRS 3 Recognising what you acquired in a business combination

IFRS 3 Recognising what you acquired in a business combination or recognizing and measuring the identifiable assets acquired, liabilities assumed, and any non-controlling interest in the acquiree.

IFRS 3 provides the following recognition principle for assets acquired, liabilities assumed, and any non controlling interest in the acquiree:

Excerpt from IFRS 3 10

As of the date, the acquirer shall recognize, separately from goodwill, the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree. Recognition of identifiable assets acquired and liabilities assumed is subject to the conditions specified in IFRS 3 11 and IFRS 3 12.

An acquirer should recognize the identifiable … Read more

IFRS 3 Complete disclosures Business Combinations

IFRS 3 Complete disclosures Business Combinations covers IFRS 3’s disclosure requirements. An illustrative disclosure is provided at the end of this Section, including insights on certain disclosure areas. IFRS 3 Complete disclosures Business Combinations

General objectives of the disclosure requirements

The acquirer discloses information that enables users of its financial statements to evaluate: IFRS 3 Complete disclosures Business Combinations

  • the nature and financial effect of a business combination (IFRS 3 59)
  • the financial effects of adjustments recognised in the current reporting period that relate to business combinations that occurred in the period or previous reporting periods (IFRS 3 61).

A business combination often results in a fundamental change to a company’s operations. The nature and extent … Read more

The acquisition method

An entity shall account for each business combination by applying . Applying requires:

  1. identifying the acquirer;
  2. determining the acquisition date;
  3. recognising and measuring the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree; and
  4. recognising and measuring goodwill or a gain from a bargain purchase.

Here is an overview of which each step will be discussed after the overview

The acquisition method

Identifying the acquirer

For each business combination, one of the combining entities shall be identified as the acquirer. (IFRS 3 6Read more

IFRS 3 Identify a business

IFRS 3 Identify a business – An entity shall determine whether a transaction or other event is a business combination by applying the definition in IFRS 3, which requires that the assets acquired and liabilities assumed constitute a business. If the assets acquired are not a business, the reporting entity shall account for the transaction or other event as an asset acquisitionSee also the accounting treatment acquisition of a business or asset(s) 

Guidance on identifying a business combination and the definition of a business are as follows:

The definition of a business: An integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing goods or services to customers, generating investment income (such as dividends or interest) or generating other income from ordinary activities.

Identifying a business combination [IFRS 3 B5 – B6] IFRS 3 Identify a business

IFRS 3 defines a business combination as a transaction or other event in which an acquirer obtains control of one or more businesses. An acquirer might obtain control of an acquiree in a variety IFRS 3 Identify a businessof ways, for example:

  1. by transferring cash, cash equivalents or other assets (including net assets that constitute a business);
  2. by incurring liabilities; IFRS 3 Identify a business
  3. by issuing equity interests; IFRS 3 Identify a business
  4. by providing more than one type of consideration; or
  5. without transferring consideration, including by contract alone.

A business combination may be structured in a variety of ways for legal, taxation or other reasons, which include but are not limited to:

  1. one or more businesses become subsidiaries of an acquirer or the net assets of one or more businesses are legally merged into the acquirer;
  2. one combining entity transfers its net assets, or its owners transfer their equity interests, to another combining entity or its owners;
  3. all of the combining entities transfer their net assets, or the owners of those entities transfer their equity interests, to a newly formed entity (sometimes referred to as a roll-up or put-together transaction); or
  4. a group of former owners of one of the combining entities obtains control of the combined entity.

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Calculating the value of an acquisition – How 2 complete it best

Calculating the value of an – This is a detailed example of calculating the fair value of an , using a logical step by step approach and realistic assumptions and determinations based on transaction and market data. Identifying and valuing intangible asset(s) is a broad endeavor and requires careful consideration of; factors specific to each business, the transaction structure, identifying the primary income generating asset, determining the discount rates, estimating the useful lives for identified intangibles. Examples of such intangibles include customer contracts, trademarks, brands, etc.

 

The Deal Fortune, Inc. acquired
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History of intangible assets

History of intangible assets – In November 1983, the International Accounting Standards Committee (IASC) approved the International Accounting Standards IAS 22 ‘Accounting for Business Combinations’ that contained the principles for accounting for goodwill. IAS 22, being concerned with business combinations, does not define goodwill. It also does not address the issues of revaluation of goodwill as well as accounting for internally generated goodwill.

For the purpose of improved international accounting standards (IASs), the IASC issued exposure draft (ED 32) “The Comparability of Financial Statements” in January 1989. ED 32 proposed amendments to IAS 22 as well as other IASs. The draft defined goodwill as the difference between the cost of Read more

Notes to the financial statements

Notes to the financial statements that contain information in addition to the statement of financial position, of financial performance, of changes in equity