Complete detection of all IFRS 3 intangibles

Complete detection of all IFRS 3 intangibles explains it all, because detecting intangible assets can be a complex and challenging matter. Strategies to detect identifiable intangible assets vary depending on the facts and circumstances of the business combination and usually require a full review of the transaction. It is important to understand the business of the acquiree, what intangible resources it depends on and how these may translate into identifiable intangible assets. It should be possible to explain the acquired business in terms of the resources it uses to generate profits and how these are reflected in the acquiree’s assets and liabilities. In other words ask the question: what has been paid for?

Use the business case and transaction case Read more

Identify and separate Intangible assets

Identify and separate Intangible assets that is one of the most important exercises in a IFRS 3 business combination. 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:

  1. an acquiree leases a manufacturing facility under an operating lease that has terms that are favourable relative to market terms. The lease terms

Read more

Case value intangibles in business combinations

Last update

Case value intangibles in business combinations provides a comprehensive business case of valuation of an acquisition of a regional provider of professional services, ProfServCo. The following intangible assets were identified as of the date of the combination:

  1. Trade name Case value intangibles in business combinations
  2. Service concession number Case value intangibles in business combinations
  3. Customer relationships Case value intangibles in business combinations
  4. Non-competition agreements. Case value intangibles in business combinations

ProfServCo was acquired as part of a business combination under IFRS 3 by AcquiCo on 30 September 20×2.

1. Trade name

ProfServCo operates in a region of the United States and has been a leading provider in its service market since it was founded in the 1970’s. … Read more

Ultimate guide to IFRS 3 Business combinations

Last update

Ultimate guide to IFRS 3 Business combinations outlines the accounting when an acquirer obtains control of a business (e.g. an acquisition or merger). Such business combinations are accounted for using the ‘acquisition method’, which generally requires assets acquired and liabilities assumed to be measured at their fair values at the acquisition date.Ultimate guide to IFRS 3 Business combinations

Definitions:

IFRS 3 Definition Acquiree: The business or businesses that the acquirer obtains control of in a business combination. Ultimate guide to IFRS 3 Business combinations

IFRS 3 Definition Acquirer: The entity that obtains control of the acquiree.

Business combination

When a buyer (acquirer) takes control of another business (the acquiree) with a transaction, it is called a business combination. There are three important … Read more

IFRS 3 Identify a business

Last update

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 acquisition. See 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 … Read more

Adjusted net asset method negative goodwill example

Last update

The adjusted net asset method negative goodwill example is used to value a business based on the difference between the fair market value of the business assets and its liabilities. Depending on the particular purpose or circumstances underlying the valuation, this method sometimes uses the replacement or liquidation value of the company assets less the liabilities.

The asset accumulation method and the adjusted net asset method are both generally accepted business valuation methods of the asset-based business valuation approach. This is an example resulting in the recognition of negative goodwill. Other examples are intangible assets and tangible asset.

The valuation expert is again retained to estimate the value of 100 percent of the owners’ equity of … Read more

Asset accumulation valuation example

Last update

Asset accumulation valuation example  – The asset accumulation method and the adjusted net asset method are both generally accepted business valuation methods of the asset-based business valuation approach. Here is an example of the asset accumulation method:

A valuation expert has been retained to estimate the fair market value of the total equity of Brown Client Company (“Brown”) as of December 31, 2016. Let’s assume that Brown is a family-owned construction contractor company. Asset accumulation valuation example

The valuation expert decided to use the asset-based valuation approach and the asset accumulation valuation method. sset accumulation valuation example

The Brown GAAP-basis balance sheet for December 31, 2016, is presented on Exhibit 1. All financial data … Read more

IFRS 13 Adjusted net asset method

Last update

IFRS 13 Adjusted net asset method and the asset accumulation method are both generally accepted business valuation methods of the asset-based business valuation approach.

First, the valuation expert typically starts with the subject company’s GAAP-based balance sheet. The valuation expert will use the balance sheet dated closest to the analysis valuation date. Preferably, the valuation expert will use the company’s balance sheet that was prepared just before the analysis valuation date. IFRS 13 Adjusted net asset method

Second, the valuation expert identifies and separates (for further analysis) any non-operating or excess assets reported on the balance sheet. Such assets may include vacant land or other assets held for investment purposes. Such assets may also include those … Read more

Adjusted net asset method

Last update

Adjusted net asset methodThe adjusted net asset method is used to value a business based on the difference between the fair market value of the business assets and its liabilities. Depending on the particular purpose or circumstances underlying the valuation, this method sometimes uses the replacement or liquidation value of the company assets less the liabilities.

Under this method, the analyst adjusts the book value of the assets to fair market value (generally measured as replacement value or liquidation value) and then reduces the total adjusted value of assets by the fair market value of all recorded and unrecorded liabilities. Both tangible and identifiable intangible assets are valued in determining total adjusted net assets.

If the analyst will be relying Read more

Valuation of Intangibles on Acquisition

Last update

In Valuation of Intangibles on Acquisition a lot of practical examples are shown to be used as a tool of reference when challenging a valuation in real life.

THE CASE: Shockwave Corporation

  • Shockwave Corporation is the largest satellite radio provider in the country. Shockwave commenced operations five years ago when the government granted satellite spectrum licenses to four start-ups seeking to cultivate a then-burgeoning industry. Since that time, precipitated by the accelerating wireless data needs of telecommunication industry technology, the government has stated that it will not be licensing any new spectrum for satellite radio but may approve the sale or transfer of existing spectrum.
  • Shockwave generates its revenue from monthly subscriptions to consumers sourced via a
Read more