B1B An entity may
apply IAS 21 retrospectively to fair value adjustments and
goodwill arising in either:
(a) The
first-time adopter shall keep the same classification (as an
acquisition by the legal acquirer, a reverse acquisition by
the legal acquiree, or a uniting of interests) as in its
previous GAAP financial statements.
(b) The
first-time adopter shall recognise all its assets and
liabilities at the date of transition to IFRSs that were
acquired or assumed in a past business combination, other
than:
(i) some
financial assets and financial liabilities derecognised
under previous GAAP (see paragraph 27); and
(ii)
assets, including goodwill, and liabilities that were not
recognised in the acquirer’s consolidated balance sheet
under previous GAAP and also would not qualify for
recognition under IFRSs in the separate balance sheet of
the acquiree (see paragraph B2(f)-B2(i)). The first-time
adopter shall recognise any resulting change by adjusting
retained earnings (or, if appropriate, another category of
equity), unless the change results from the recognition of
an intangible asset that was previously subsumed within
goodwill (see paragraph B2(g)(i)).
(c) The
first-time adopter shall exclude from its opening IFRS
balance sheet any item recognised under previous GAAP that
does not qualify for recognition as an asset or liability
under IFRSs. The first-time adopter shall account for the
resulting change as follows:
(i) the
first-time adopter may have classified a past business
combination as an acquisition and recognised as an
intangible asset an item that does not qualify for
recognition as an asset under IAS 38 Intangible Assets. It
shall reclassify that item (and, if any, the related
deferred tax and minority interests) as part of goodwill
(unless it deducted goodwill directly from equity under
previous GAAP, see paragraph B2(g)(i) and B2(i)).
(ii) the
first-time adopter shall recognise all other resulting
changes in retained earnings.*
(d) IFRSs
require subsequent measurement of some assets and
liabilities on a basis that is not based on original cost,
such as fair value. The first-time adopter shall measure
these assets and liabilities on that basis in its opening
IFRS balance sheet, even if they were acquired or assumed in
a past business combination. It shall recognise any
resulting change in the carrying amount by adjusting
retained earnings (or, if appropriate, another category of
equity), rather than goodwill.
(e)
Immediately after the business combination, the carrying
amount under previous GAAP of assets acquired and
liabilities assumed in that business combination shall be
their deemed cost under IFRSs at that date. If IFRSs require
a cost-based measurement of those assets and liabilities at
a later date, that deemed cost shall be the basis for
cost-based depreciation or amortisation from the date of the
business combination.
(f) If an
asset acquired, or liability assumed, in a past business
combination was not recognised under previous GAAP, it does
not have a deemed cost of zero in the opening IFRS balance
sheet. Instead, the acquirer shall recognise and measure it
in its consolidated balance sheet on the basis that IFRSs
would require in the separate balance sheet of the acquiree.
To illustrate: if the acquirer had not, under its previous
GAAP, capitalised finance leases acquired in a past business
combination, it shall capitalise those leases in its
consolidated financial statements, as IAS 17 Leases would
require the acquiree to do in its separate IFRS balance
sheet. Conversely, if an asset or liability was subsumed in
goodwill under previous GAAP but would have been recognised
separately under IAS 22, that asset or liability remains in
goodwill unless IFRSs would require its recognition in the
separate financial statements of the acquiree.
(g) The
carrying amount of goodwill in the opening IFRS balance
sheet shall be its carrying amount under previous GAAP at
the date of transition to IFRSs, after the following three
adjustments:
(i) If
required by paragraph B2(c)(i) above, the first-time
adopter shall increase the carrying amount of goodwill
when it reclassifies an item that it recognised as an
intangible asset under previous GAAP. Similarly, if
paragraph B2(f) requires the first-time adopter to
recognise an intangible asset that was subsumed in
recognised goodwill under previous GAAP, the first-time
adopter shall decrease the carrying amount of goodwill
accordingly (and, if applicable, adjust deferred tax and
minority interests).
(ii) A
contingency affecting the amount of the purchase
consideration for a past business combination may have
been resolved before the date of transition to IFRSs. If a
reliable estimate of the contingent adjustment can be made
and its payment is probable, the first-time adopter shall
adjust the goodwill by that amount. Similarly, the
first-time adopter shall adjust the carrying amount of
goodwill if a previously recognised contingent adjustment
can no longer be measured reliably or its payment is no
longer probable.
(iii)
Regardless of whether there is any indication that the
goodwill may be impaired, the first-time adopter shall
apply IAS 36 Impairment of Assets in testing the goodwill
for impairment at the date of transition to IFRSs and in
recognising any resulting impairment loss in retained
earnings (or, if so required by IAS 36, in revaluation
surplus). The impairment test shall be based on conditions
at the date of transition to IFRSs.
(h) No other
adjustments shall be made to the carrying amount of goodwill
at the date of transition to IFRSs. For example, the
first-time adopter shall not restate the carrying amount of
goodwill:
(i) to
exclude in-process research and development acquired in
that business combination (unless the related intangible
asset would qualify for recognition under IAS 38 in the
separate balance sheet of the acquiree);
(ii) to
adjust previous amortisation of goodwill;
(iii) to
reverse adjustments to goodwill that IAS 22 would not
permit, but were made under previous GAAP because of
adjustments to assets and liabilities between the date of
the business combination and the date of transition to
IFRSs.
(i) If the
first-time adopter recognised goodwill under previous GAAP
as a deduction from equity:
(i) it
shall not recognise that goodwill in its opening IFRS
balance sheet. Furthermore, it shall not transfer that
goodwill to the income statement if it disposes of the
subsidiary or if the investment in the subsidiary becomes
impaired.
(ii)
adjustments resulting from the subsequent resolution of a
contingency affecting the purchase consideration shall be
recognised in retained earnings.
(j) Under
its previous GAAP, the first-time adopter may not have
consolidated a subsidiary acquired in a past business
combination (for example, because the parent did not regard
it as a subsidiary under previous GAAP or did not prepare
consolidated financial statements). The first-time adopter
shall adjust the carrying amounts of the subsidiary’s assets
and liabilities to the amounts that IFRSs would require in
the subsidiary’s separate balance sheet. The deemed cost of
goodwill equals the difference at the date of transition to
IFRSs between:
(i) the
parent’s interest in those adjusted carrying amounts; and
(ii) the
cost in the parent’s separate financial statements of its
investment in the subsidiary.
(k) The
measurement of minority interests and deferred tax follows
from the measurement of other assets and liabilities.
Therefore, the above adjustments to recognised assets and
liabilities affect minority interests and deferred tax.
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