SLFRS 3 Business Combinations

Gain on Presentation in
Goodwill
Goodwill Definition of a
Bargain Financial Other Topics
Calculation
Calculation Business
Purchase Statements

= When
▪ Cost of ▪ Cost of ▪ Goodwill – As an ▪ Acquisition date ▪ An Integrated Set
Combination Combination Asset on the determination of Activities or
(Investment) (Investment) Group Statement Assets
of Financial ▪ Measurement
+ + Position Period Adjustments ▪ Capable of Being
▪ Non- Controlling Managed
▪ Non- Controlling
Interest Interest ▪ Common Control
▪ Gain on Bargain ▪ To Provide a
Transactions
(-) Is Less than Purchase – As Return to Investors
Income in the
▪ Fair value of ▪ Fair value of Group Statement ▪ Generally has
IDENTIFIABLE IDENTIFIABLE of Profit or Loss Inputs, Processes
assets & liabilities assets & liabilities and Outputs
 Goodwill Calculation

Cost of Non-Controlling Fair value of

Combination Interest (option Identifiable
(Investment) available for
assets &
each transaction)
liabilities

▪ Cash (excl. txn cost)

▪ NCI at % of Net Assets ▪ NCI at Fair Value of ▪ All Assets and Liabilities
▪ Fair value of assets Shares Owned by them on SFP Measured at FV
Acquired (Partial
transferred or (Full Goodwill Method)
Goodwill Method)
liabilities taken
▪ Intangible assets (Brand
▪ Goodwill recognized ▪ Goodwill Measured at its Names / TM’s etc) not on
▪ Fair value of
only to the extent of Full Value (100% value) SFP recognized at FV if
Shares issued
Parents ownership % separable from entity
▪ PV of Deferred
Payments ▪ Subsequent Impairment ▪ Subsequent Impairment ▪ Contingent Liabilities
Losses on Goodwill Losses on Goodwill Shared are measured at FV
▪ FV of Contingent allocated to Parent only between Parent and NCI
Payments
 Goodwill Calculation Illustration
Current Major Makes Payment
shareholder /
Seller - Cash
(A Ltd) - Asset Transferred
- Liabilities incurred
100% - Shares issued
- Deferred Payment
- Contingent payment

Total value = 1,000

Acquirer
Post Investment (P Ltd)
owns 100% Goodwill = 1,000 + 0 – 600
Acquiree (S Ltd) = 400
(The Business being acquired)
TA = 1,500
TL = 900
NA = 600
 Goodwill Calculation Illustration
Current Major
NCI Makes Payment
shareholder /
(B Ltd) Seller - Cash
(A Ltd) - Asset Transferred
- Liabilities incurred
- Shares issued
- Deferred Payment
20% 80% - Contingent payment

Total value = 100 shares x

80% x 12.5 = 800
Acquirer
Post Investment (P Ltd)
owns 80% Goodwill (1) = 800 + 120 –
600 = 320
Acquiree (S Ltd)
(The Business being acquired) OR
No. of shares = 100 NA = 600 Goodwill (2) = 800 + 200 –
Price per share = 12.5 600 = 400
 Goodwill Calculation Illustration
PARTIAL Goodwill FULL Goodwill Method
Method

Investment = 800
Investment = 800
+
+
NCI = 100 shares x 20% x
NCI = 600 x 20% = 120 12.5 = 200

(-) (-)
NA = 600 NA = 600
= =
Goodwill (1) = 800 + 120 – Goodwill (2) = 800 + 200 –
600 = 320 600 = 400

20%

80% 80%