BC - Chapter 1
BC - Chapter 1
BC - Chapter 1
PFRS 3: Business
Combination
Date: 06/14/2022
Essential Elements
● Business
○ Input
○ Process
○ Output
● Control
○ Majority of the Board of Directors
○ Majority of Votes/ More than half of the votes
○ Policies
Steps:
1. Identifying the acquirer.
● General
● Control
● Specific
● Asset Acquisition (Accounting Merger) : The one who transfers
cash and other assets.
○ 100%
○ After the acquisition, the acquiree is dissolved and only the
acquirer continues to exist
● Reverse Acquisition: the one who issues the interest is not the
acquirer but the acquiree.
● Others:
● In a business combination involving two or more entities: Who
initiated?
● In a business combination wherein a new entity is formed:
Purpose Acquirer
What if the fair values at the acquisition date are tentative or provisional?
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3. Recognition & Measuring of identifiable assets, the liabilities acquired, and the
non-controlling interest in the acquiree
a. Asset & Liabilities
i. Recognition: Meet the definition of assets and liabilities
ii. Measurement:
1. Fair Value
2. Separate Valuation
b. NCI
i. Recognition: the equity interest not attributable to a parent, directly
or not
ii. Measurement:
1. GIven Fair Value
Consideration
2. Assumed FV ( x NCI)
Ownership %
3. (FVNA x NCI%) =NCI appropriate share in net identifiable
assets acquired. 1
Consideration Transferred FV
TOTAL
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PFRS 3: Business
Combination; Fair Value of
Net Asset
Date: 06/18/2022
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Additional Concepts
● Restructuring Provisions-incurred
○ Recognition:
1. Recognition/ Non-recognition
○ Recognition: Identifiable
○ Recognition:
i. Present Obligation
○ However, still, PAS 12 prohibits the recognition of DTL arising from initial
recognition of goodwill.
● Employees Benefits
● Indemnification assets
Example: Entity A acquires Entity B. At the acquisition date, the taxing authority is
disputing Entity B’s tax returns in prior years. The former owners of Entity B agree to
reimburse Entity A in case Entity A will be held liable to pay Entity B’s tax deficiencies in
the prior years. At the acquisition date, Entity A recognizes a tax liability to the
taxing authority and an indemnification asset for the reimbursement due from the
former owners of Entity
A non-current asset (or disposal group) that is classified as held for sale at
the acquisition date at fair value less costs to sell in accordance with PFRS 5
Non-current Assets Held for sale and Discontinued Operations, rather than at fair
value under PFRS 3.
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