How to value NCI on the date of business combination?

IFRS 3.19. For each business combination, the acquirer shall measure at the acquisition date
components of non-controlling interests in the acquiree that are present ownership interests and
entitle their holders to a proportionate share of the entitys net assets in the event of liquidation
at either:
a. fair value; or
b. the present ownership instruments proportionate share in the recognised amounts of the
acquirees identifiable net assets.
All other components of non-controlling interests shall be measured at their acquisition-date fair
values, unless another measurement basis is required by IFRSs.
Based on my understanding of this provision, valuation of NCI either at FMV of NCI or
proportionate share of the net identifiable asset are alternatives. It does not state the higher of
or the lower of. If you find a provision or application guideline that states the higher of or
the lower of, please enlighten me.
How do you compute for the fair market value of the NCI?
IFRS 3. B44. This IFRS allows the acquirer to measure a non-controlling interest in the
acquiree at its fair value at the acquisition date. Sometimes an acquirer will be able to measure
the acquisition-date fair value of a non-controlling interest on the basis of a quoted price in an
active market for the equity shares (ie those not held by the acquirer). In other situations,
however, a quoted price in an active market for the equity shares will not be available. In those
situations, the acquirer would measure the fair value of the non-controlling interest using other
valuation techniques.
Can you simply get the NCIs share of the gross up value of the acquisition price of the
acquirer to proxy as fair market value of the NCI?
IFRS 3.B45. The fair values of the acquirers interest in the acquiree and the non-controlling
interest on a per-share basis might differ. The main difference is likely to be the inclusion of a
control premium in the per-share fair value of the acquirers interest in the acquiree or,
conversely, the inclusion of a discount for lack of control (also referred to as a non-controlling
interest discount) in the per-share fair value of the non-controlling interest if market participants
would take into account such a premium or discount when pricing the non-controlling interest.
What to do if NCI is valued at FMV and FMV is lower than the proportionate share of the
FMV of the net identifiable asset?
IFRS 3.32 The acquirer shall recognise goodwill as of the acquisition date measured as the
excess of (a) over (b) below:
a. the aggregate of:
i.
the consideration transferred measured in accordance with this IFRS, which generally
requires acquisition-date fair value (see paragraph 37);
ii.
the amount of any non-controlling interest in the acquire measured in accordance with
this IFRS; and

iii.

in a business combination achieved in stages (see paragraphs 41 and 42), the

acquisition-date fair value of the acquirers previously held equity interest in the
acquiree. (this is to be discussed in module 3)
b. the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities
assumed measured in accordance with this IFRS.
Based on my understanding of the two provisions above, there is no separate gain on bargain
purchase (or goodwill) for the NCI and the parent. There is only one way to compute (based on
IFRS 3.32 above). If the result is goodwill, a goodwill is recorded or included in the WPEE. The
corresponding net credit (to the debit to goodwill) is to Investment in Subsidiary (based on the
amount that will bring the consolidated balance to zero) and to NCI (based on the amount that
will bring the NCI to its fair market value).
Same is true for gain on bargain purchase. It is recorded (or included in the WPEE) as credit to
gain on bargain purchase. The net debit is to Investment in Subsidiary (based on the amount
that will bring the consolidated balance to zero) and to NCI (based on the amount that will bring
the NCI to its fair market value).
Note that the WPEE for recording goodwill (or gain on bargain purchase) is a consequence (or
a result of) the ultimate objective of bringing the consolidated Investment in Subsidiary to zero
and NCI as of the date of business combination equal to its fair market value. (For NCI, this is
only relevant if the valuation is at FMV. If NCI is valued at proportionate share in FMV of net
identifiable asset, then the valuation would already be complete after WPEE 1 (elimination of
SHE of subsidiary) and WPEE 2 (establishing and allocating the excess of FMV over BV of
assets and liabilities)
Is the computed amount of gain on bargain purchase (that is charged to the income
statement) allocated between parent and NCI?
IFRS 3.34. Occasionally, an acquirer will make a bargain purchase, which is a business
combination in which the amount in paragraph 32(b) exceeds the aggregate of the amounts
specified in paragraph 32(a). If that excess remains after applying the requirements in
paragraph 36, the acquirer shall recognise the resulting gain in profit or loss on the acquisition
date. The gain shall be attributed to the acquirer.