Accounting Ifrs 3

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Transcript of Accounting Ifrs 3

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THE GROUPSL. NAME ID

01. MOIN UDDIN REZA 16-104

02. REAJMIN SULTANA 16-119

03. MD. TANVIR HOSSAIN 16-147

04. ARIFA TUN NAIM 16-153

05. SUBARNA GOSWAMI 16-139

06. MD. MOHITUL ISLAM 16-253

07. TAHSIN NAZIM 16-106

08. AZIZA AKHTER 16-136

09. HASINA BEGUM 16-116

10. MAHMUDUL HASAN 16-159

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IAS IFRS

IASC IAS

1973-2011

IASB IFRS

2011- ON WARDS

SHAPING THE CONCEPT

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IFRS 3 IAS 27

BUSINESS COMBINATION

1. A B C2. A B 3. A B

(Cons.)

CONSOLIDATION

IFRS 3 VS. IAS 27

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BUSINESS

COMBINATION

IFRS 3

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Business combination The bringing together of separate entities or

business into one reporting entity.

Parent : an entity that has one or more subsidiaries

Subsidiary : an entity including an unincorporated entity that is controlled by another entity.

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Method followed by business combination :

All business combinations must be accounted by applying the purchase method which involves 3 steps:

Identifying and acquirer Measuring the cost of business

combinationAllocation the cost of business

combination.

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PURCHASE METHOD OF ACCOUNTING

1. •Identifying the acquirer

2. •Measuring the cost of business combination

3. •Allocating the cost of business combination

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IDENTIFYING THE ACQUIRER

THE ACQUIRER

SHOULD BE IDENTIFIED

FOR ALL BUSINESS

COMBINATION

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Control also exists when P has power:

Over a majority of the voting

rights

To appoint or remove board of directors

To cast the majority

votes

To govern the financial & operating

policies

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The entity has greater fair value

The entity giving up the cash or other assets

Select the management team

ADITIONAL INDICATORS

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COST OF BUSINESS COMBINATION

1.Total fair

values of the

considerati-on given.

2. Directl

y attribut

able cost

Cost of busines

s combina-tion

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FAIR VALUE CONSIDERATION

FAIR VALUE

CONSID-ERATION

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Deferred consideratio

n

1. Should be valued at discounted present value

2. For marketable securities, market values at the

acquisition date.

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Contingent consideration

1. Depends on uncertain future events.

2. IAS 37 provisions(contingent assets & liabilities) are

applied.3. Assessment base is accounting

estimate not accounting policy.

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Proceeds…

Directly Attributable Cost

1. Must be included in the cost of combination. e.g.

professional fees, legal costs etc.

2. Should not include general administrative cost & internal

cost(staff cost).3. Financial liabilities(e.g. loans)

& equity issue costs are deducted from liability/equity.

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ALLOCATING THE COST OF COMBINATION

The acquiree’s identifiable assets, liabilities & contingent liabilities should be recognized at the fair value at the date of acquisition.

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HOW TO IDENTIFIY NET ASSET ACQUIRED?Assets

ot

her t

han i

nt

angi

bl

e

asset

s

Liabilities other than contingent liabilities

Intangible assets

Contingent liabilities

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HOW TO RECOGNIZE LIABILITIES?

An acquirer may only recognize acquirees liabilities if they exist at the acquisition date if

BFRS prohibits any accounts being taken at the time of two factors:

Reorganiza-tion

plans

Future

losses

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RECOGNITION OF INTANGIBLE ASSETS

Arise from contractual or legal rightsSeparable

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SEPARABLE ASSETS

Database

Non-contractu

al customer relations

hip

Customer list

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Assets Arising from Contractual Or Legal Rights

TrademarksInternet Domain NamesNewspaper MastheadsLeasesComputer SoftwareLicense to broadcast TV or Radio programs

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CONTINGENT LIABILITIES

Contingent Liabilities are recognized when it is reliably measurable. But it will not be recognized in the Balance Sheet of Acquiree .

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CONSEQUENCES OF RECOGNITION AT FAIR VALUE

Acquirer’s consolidated income statement must include the acquiree ’s profit and loss.

Fair value of the acquiree ’s net asset in the consolidated financial statement are not incorporated into the acquire- e’s single entity Financial statement.

Any minority interest in the acquiree is based on the minority interest share of the net asset at their fair values.

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GOODWILL AT ACQUISITION

ANY GOODWILL CARRIED IN THE ACQUIREE’S BALANCE SHEET BECOMES SUBSUMED IN THE GOODWILL ARISING ON ACQUISITION

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GOODWILL

Goodwill Subsequent To Acquisition:After initial recognition, goodwill should be:

1. Carried in the balance sheet at cost less accumulated impairment losses

2. Tested for impairment at least annually

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DISCOUNT ON ACQUISITION

Discount arises because:I. Errors in the

measurementII.Errors in cost of

combination

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Action needed to resolve: Reassess the measurement &

identification of the net assetThe measurement of the cost of

combinationChecking whether fair value reflect

the arising future cost correctly

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INITIAL ACCOUNTING

Initial accounting is the process of identifying & determining the fair values of:

The acquiree’s identifiable assets liabilities and contingent liabilities

Cost of combination

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At the end of the accounting period in which the combination is effected, only provisional value can be established.

In cases of valuation of non-current assets: Provisional value Adjustments Comparative figure

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FAIR VALUE ADJUSTMENTS

Consolidated Balance SheetConsolidated Income Statement

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WORKED OUT PROBLEM

P S BUT, FV OF PPEDEPRECIATION

60% 1ST JULY, 2002

NET ASSET 5000

1 000 HIGHER THAN CARRYING AMOUNT

NET ASSET 10000

30 JUNE, 2005

10 YEARS

8 000

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SOLUTION

1. NET ASSETS & POST ACQUISITION RESERVE:

ACQUISITION BALANCE POST

DATE DATE ACQUISITON

NET ASSET 5000 10000 5000

PPE FAIR VALUE UPLIFT 1000 1000 0

DEP. -3 YRS= 30% 0 (300) (300)

6000 10700 4700

* P LTD’S SHARE- 60% 2820

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2. GOODWILL: COST OF SHARE

8000 SHARE OF NET ASSET

(3600)

= 4400

3.DEPRICIATION: ADDITIONAL CHARGE (1000* 10%) =

100

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SELF TEST

1. IFRS 3 permits a company to

A. Amortize goodwill over its useful life B. Write off immediately and amortize

goodwill relating to different acquisition. C. Revalue goodwill upwards D. Restate goodwill at acquisition as a result

of adjustment to values within one year of

the acquisition date.

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2. Sovon F. LTD acquires the following during the year ended 30 june, 2006

a. the separable net assets of Basic ltd, a sole trader.

b. 100% of the share capital of yung.cho ltd.In accordance to IFRS 3, goodwill may arise in Sovon

F. ltd’s own financial statements in respect of

A. Basic ltd & Yung.cho ltd C. Yung.cho ltd B. Basic ltd D. neither Basic nor

Yung

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THANK YOU