Beruflich Dokumente
Kultur Dokumente
A-IFRS Workshop
Objectives
This module is designed to:
develop an understanding of:
AASB AASB AASB AASB 3 Business Combinations 127 Consolidated and Separate Financial Statements 128 Investments in Associates 131 Interests in Joint Ventures
Business combinations
1. Overview
Objectives
key pronouncements major impact areas
Overview
the bringing together of separate entities or businesses into one reporting entity AASB 3 - business combinations only
look to other A-IFRSs for acquisitions of assets
AASB 3
excluded included excluded excluded
IFRS 3
excluded excluded excluded
(ED - include)
excluded
(ED - include)
AASB 3
included
IFRS 3
excluded
must apply requirements of AASB 3 exemption for non-Corps Act entities, can elect to use existing book values in some limited circumstances
Yes
No
Has the entity elected to account for the combination at book values?
Yes
Measure net assets at their carrying amounts immediately prior to the reconstruction
10
Preliminary View: Account for reconstructions within a reporting entity at book value
11 Business combinations - scope 2004 Deloitte Touche Tohmatsu
Concept of a business
Key concepts:
integrated set of activities and assets managed for a return or other economic benefits generally consists of inputs, processes and resulting outputs goodwill present presumed to be a business an entity is not always a business
Exercise 2.1
identifying businesses, implications Page 14
12 Business combinations - scope 2004 Deloitte Touche Tohmatsu
Concept of a business
Answers
1. Bs service operation 2. Ds net assets, excluding systems and management 3. Computers & telephone systems 4. M, single investment property 5. Q, gas pipeline Depends
13
Concept of a business
Exercise 2.2
Do your recent acquisitions represent businesses?
Page 15
Exercise 2.3
What are the consequences of an acquisition representing a businesses?
Page 15
14
Identifying an acquirer
Key concepts:
acquirer must be identified for all acquisitions the combining entity that obtains control of the other combining entities or businesses if difficult, consider:
relative fair values of combining entities entity giving up cash might be the acquirer domination of management team
15
Identifying an acquirer
Exercise 2.4
identifying the acquirer Page 17
16
Identifying an acquirer
Answers
1. CD acquires AB 2. Group restructure Entity AB NO ACQUIRER
17
Identifying an acquirer
Exercise 2.5
Could any of you recent acquisitions be regarded as a reverse acquisition?
Page 18
18
20
At date of exchange Assets given Liabilities incurred or assumed Equity instruments issued by acquirer
21
22
Answers
a) 3,000,000 shares x $10.75 = $32,250,000 b) as follows: 1. Finders fee of $20,000 2. Lawyers fees of $80,000 3. Costs incurred by DEF 4. Accountants fees 5. Valuers fees 6. Costs of issuing shares 7. Costs of arranging finance NO YES NO YES YES NO NO
23
Answers, continued
d) total cost:
Cost of shares issued Cash consideration paid Other costs TOTAL $32,250,000 3,000,000 145,000 $35,395,000
e) journal entry:
DR Investment CR Equity CR Borrowings CR Cash/payables DR Expense
24 Business combinations accounting requirements
Measurement
Fair value Fair value Fair value less costs to sell Fair value Fair value Fair value Cost
Recognition criteria
Probable, reliably measurable Identifiable, reliably measurable As above Probable, reliably measurable Acquiree has existing liability under AASB 137 Reliably measurable None
2004 Deloitte Touche Tohmatsu
26
27
28
4. Impairment of goodwill
Objectives
understand approach to impairment testing of goodwill
30
Business combinations
Exercise 4.1
allocating goodwill to CGUs page 35
31 Business combinations 2004 Deloitte Touche Tohmatsu
32
Business combinations
34
First-time adoption
35
First-time adoption
FRD 113 Investments in Subsidiaries, Jointly Controlled Entities and Associates: Do not restate business combinations
36
First-time adoption
37
First-time adoption
38
First-time adoption
Disclosure
Checklist on page 45
40
Disclosure
Consolidations
AASB 127 Consolidated and Separate Financial Statements
Parent entity must present consolidated financial statements (consolidating all subsidiaries) Subsidiaries based on control
consistent with AASB 1024 concepts
Public sector:
control may be established by legislation or executive authority or by administrative arrangements
ministerial approval is required for budgets power of the minister to appoint remove members of the board ministerial power of direction
42
Consolidation
Consolidations
Key differences:
Subsidiaries financial statements used for consolidation purposes:
should be the same date as parent entity may differ by up to 3 months (but must adjust for significant transactions and events)
43
Consolidation
Consolidations
Separate financial statements of the parent entity
measure investment in subsidiaries, jointly controlled entities and associates:
cost; or in accordance with AASB 139
FRD 113 Investments in Subsidiaries, Jointly Controlled Entities and Associates: - Measure at cost.
44
Consolidation
Investments in associates
AASB 128 Investments in Associates
Associates based on significant influence
consistent with AASB 1016 concepts
Investments in associates must be measured using the equity method in the consolidated financial statements Scope exclusions:
venture capital organisations mutual funds, unit trusts, etc investments designated as fair value through profit and loss under AASB 139
45
Associates
Investments in associates
Other Exemptions:
Investment held for sale under AASB 5 If the following conditions are satisfied:
all owners agree that equity accounting not be applied investors debt/equity securities not traded accounts not filed for purpose of issuing securities parent entity prepares consolidated accounts, which adopt equity accounting, and accounts are publicly available
46
Associates
Investments in associates
Reporting date of investee:
Investor uses the most recent available financial statements of associate (in order to apply equity accounting) If associate has a different reporting date:
associate prepares investor financial statements using the investors reporting date (unless impracticable) if associate prepares financial statements at a different reporting date, the investor must adjust for any significant transactions or events that occur between the two dates in any case, the reporting dates cannot differ by more than 3 months
47 Associates 2004 Deloitte Touche Tohmatsu
Investments in associates
Key differences:
No amortisation of notional goodwill
consistent with AASB 3 Business Combinations
If entity ceases to be an associate, investment is treated as a financial asset under AASB 139
AASB 1016 required investment to be measured at cost
48
Associates
Investments in associates
First time adoption:
Same rules as business combinations
full restatement of past business combinations no restatement before date of transition restatement from a particular date
FRD 113 Investments in Subsidiaries, Jointly Controlled Entities and Associates: Do not restate prior acquisitions of associates
49
Associates
Joint ventures
AASB 131 Interests in Joint Ventures
Jointly AASB 131 controlled operations AASB 1006 Jointly controlled assets Jointly controlled entities Joint Joint venture operations venture entities
Workshop summary
Summary
Summary
Points to note Associates:
some scope exclusions no amortisation of notional goodwill rules for difference reporting dates definition of net investment in associate
53
Business combinations
Deloitte Touche Tohmatsu is an organization of member firms devoted to excellence in providing professional services and advice. We are focused on client service through a global strategy executed locally in nearly 150 countries. With access to the deep intellectual capital of 120,000 people worldwide, our member firms, including their affiliates, deliver services in four professional areas: audit, tax, consulting, and financial advisory. Our member firms serve more than one-half of the worlds largest companies, as well as large national enterprises, public institutions, locally important clients, and successful, fast-growing global companies. For regulatory and other reasons, certain member firms do not provide services in all four professional areas. This document has been prepared as a general guide to the matters covered. It is not possible to cover all the situations that may be encountered in practice and, in addition, readers may have alternative solutions to some of the questions raised and answers offered. Accordingly, this document should not be viewed as a substitute for detailed reading of the associated accounting pronouncements or professional advice on specific matters of concern. Whilst every effort has been made to ensure that the information contained in this document is accurate, neither Deloitte Touche Tohmatsu nor any of its partners, directors, principles, consultants or employees shall be liable to any party in respect of decisions or actions taken as a result of using the information in this document.
Copyright Deloitte Touche Tohmatsu 2004. No part of this document may be reproduced, stored, transmitted in any form or by any means without the prior written permission of Deloitte Touche Tohmatsu. The liability of Deloitte Touche Tohmatsu is limited by, and to the extent of, the Accountants Scheme under the Professional Standards Act 1994 (NSW).