WELCOME

THE GROUP
SL.

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

IAS
IASC

IFRS
IAS

1973-2011

IASB

IFRS

2011- ON WARDS

IFRS 3
BUSINESS COMBINATION

A
2. A
3. A
1.

B
B
B

C
(Cons.)

IAS 27
CONSOLIDATION

 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.

 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 combination
Allocation the cost of business combination.

PURCHASE METHOD OF ACCOUNTING

1.

Identifying the acquirer

2.

Measuring the cost of business

combination

3.

Allocating the cost of business

combination

IDENTIFYING THE ACQUIRER

THE ACQUIRER
SHOULD BE
IDENTIFIED FOR
ALL BUSINESS
COMBINATION

1. ACQUIRER
2.CONTROL

Over a majority of the voting

rights

To govern
the
financial
&
operating
policies

Control
also exists
when P
has power:
To cast the majority votes

To
appoint or
remove
board of
directors

ADITIONAL INDICATORS

The entity
has greater
fair value

The entity
giving up
the cash or
other
assets

Select the
manageme
nt team

COST OF BUSINESS COMBINATION

1.Total fair
values of the
consideration given.

2. Directly
attributable
cost

Cost of
business
combination

FAIR VALUE CONSIDERATION

Measured at fair value at the date of
exchange

In the form
of cash or
other assets,
liabilities,
and equity
instruments

FAIR
VALUE
CONSIDERATION

Future losses or other costs relating

combination not part of the cost of the
combination

Fair value of
any quoted
equity
investments
the
published
price at the
date of
exchange

Deferred
consideration

1. Should be valued at discounted

present value
2. For marketable securities, market
values at the acquisition date.

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.

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.

ALLOCATING THE COST OF COMBINATION

The acquirees identifiable

assets, liabilities & contingent
liabilities should be
recognized at the fair value at
the date of acquisition.

HOW TO IDENTIFIY NET ASSET ACQUIRED?

Assets other than

intangible assets

Liabilities other than

contingent liabilities

Intangible assets

Contingent liabilities

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:

Reorganization plans

Future
losses

RECOGNITION OF INTANGIBLE ASSETS

Arise from
contractual or
legal rights

Separable

SEPARABLE ASSETS

Noncontractual
customer
relationship

Customer list

Database

Assets Arising from Contractual Or Legal Rights

Trademarks

Internet Domain Names

Newspaper Mastheads
Leases

Computer Software
License to broadcast TV or Radio programs

CONTINGENT LIABILITIES

Contingent Liabilities are

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

CONSEQUENCES OF RECOGNITION AT FAIR

VALUE
Acquirers 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- es 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.

GOODWILL AT ACQUISITION

ANY GOODWILL CARRIED IN THE

ACQUIREES BALANCE SHEET BECOMES

SUBSUMED IN THE GOODWILL ARISING
ON ACQUISITION

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

DISCOUNT ON ACQUISITION

Discount arises because:

I. Errors in the measurement
II. Errors in cost of combination

Action needed to resolve:

Reassess the measurement & identification
of the net asset
The measurement of the cost of combination
Checking whether fair value reflect the
arising future cost correctly

INITIAL ACCOUNTING
Initial accounting is the process of identifying
& determining the fair values of:
The acquirees identifiable assets liabilities

and contingent liabilities

Cost of combination

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

FAIR VALUE ADJUSTMENTS

Consolidated
Balance Sheet

Consolidated
Income
Statement

WORKED OUT PROBLEM

60%
8 000

1ST JULY, 2002

30 JUNE, 2005

NET ASSET
5000

NET ASSET
10000

BUT,
FV OF PPE 1 000 HIGHER THAN CARRYING AMOUNT
10 YEARS
DEPRECIATION

SOLUTION
1. NET ASSETS & POST ACQUISITION RESERVE:
ACQUISITION BALANCE
NET ASSET
PPE FAIR VALUE UPLIFT
DEP. -3 YRS= 30%

* P LTDS SHARE- 60%

DATE
5000
1000
0

DATE
10000
1000
(300)

6000

10700

POST
ACQUISITON
5000
0
(300)

4700
2820

2. GOODWILL:
COST OF SHARE
SHARE OF NET ASSET

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

8000
(3600)
= 4400

= 100

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.

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. ltds own financial statements in respect of
A. Basic ltd & Yung.cho ltd
C. Yung.cho ltd
B. Basic ltd
D. neither Basic nor Yung

THANK YOU