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1/13/2015 InternationalFinancialReportingStandards

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14

InternationalFinancialReportingStandards

Title Dateissued

EffectiveDate

IFRS1FirsttimeAdoptionofInternationalFinancialReportingStandards

24Nov2008 01Jul2009

IFRS2SharebasedPayment 19Feb2004 01Jan2005IFRS3BusinessCombinations 10Jan2008 01Jul2009IFRS4InsuranceContracts 31Mar2004 01Jan2005IFRS5NoncurrentAssetsHeldforSaleandDiscontinuedOperations 31Mar2004 01Jan2005IFRS6ExplorationforandEvaluationofMineralResources 09Dec2004 01Jan2006IFRS7FinancialInstruments:Disclosures 18Aug2005 01Jan2007IFRS8OperatingSegments 30Nov2006 01Jan2009IFRS9FinancialInstruments 24Jul2014 01Jan2018IFRS10ConsolidatedFinancialStatements 12May2011 01Jan2013IFRS11JointArrangements 12May2011 01Jan2013IFRS12DisclosureofInterestsinOtherEntities 12May2011 01Jan2013IFRS13FairValueMeasurement 12May2011 01Jan2013IFRS14RegulatoryDeferralAccounts 30Jan2014 01Jan2016IFRS15RevenuefromContractswithCustomers 28May2014 01Jan2017Note:Thetableaboveliststhemostrecentversion(s)ofeachpronouncementandthedateeachversionwasoriginallyissued.Clickthroughtoourpageforeachpronouncementforafullhistory.

Thispagecontainslinkstooursummaries,analysis,historyandresourcesforInternationalFinancialReportingStandards(IFRS)issuedbytheInternationalAccountingStandardsBoard(IASB).

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1/13/2015 InternationalFinancialReportingStandards

http://www.iasplus.com/en/standards/ifrs 2/2

1/13/2015 IFRS1FirsttimeAdoptionofInternationalFinancialReportingStandards

http://www.iasplus.com/en/standards/ifrs/ifrs1 1/12

IFRS1FirsttimeAdoptionofInternationalFinancialReportingStandards

Overview

IFRS1FirsttimeAdoptionofInternationalFinancialReportingStandardssetsouttheproceduresthatanentitymustfollowwhenitadoptsIFRSsforthefirsttimeasthebasisforpreparingitsgeneralpurposefinancialstatements.TheIFRSgrantslimitedexemptionsfromthegeneralrequirementtocomplywitheachIFRSeffectiveattheendofitsfirstIFRSreportingperiod.

ArestructuredversionofIFRS1wasissuedinNovember2008andappliesifanentity'sfirstIFRSfinancialstatementsareforaperiodbeginningonorafter1July2009.

HistoryofIFRS1

Date Development Comments

September2001 ProjectaddedtoIASBagenda Historyoftheproject

31July2002 ExposureDraftED1FirsttimeApplicationofIFRSspublished

Commentdeadline31October2002

June2003 IFRS1FirsttimeAdoptionofIFRSsissued

EffectiveforthefirstIFRSfinancialstatementsforaperiodbeginningonorafter1January2004

30June2005 AmendedbyAmendmentstoIFRS1FirsttimeAdoptionofInternationalFinancialReportingStandardsandIFRS6ExplorationforandEvaluationofMineralResources(moreinformation)

AminoramendmenttoclarifythattheexemptioninrelationtoIFRS6appliestotherecognitionandmeasurementrequirementsofIFRS6,aswellasthedisclosurerequirements.

22May2008 AmendedbyAmendmentstoIFRS1andIAS27CostofanInvestmentinaSubsidiary,JointlyControlledEntityorAssociate

Effectiveforannualperiodsbeginningonorafter1January2009

24November2008 RestructuredversionofIFRS1issued Effectiveifanentity'sfirstIFRSfinancialstatementsareforaperiodbeginningonorafter1July2009

23July2009 AmendedbyAdditionalExemptionsforFirsttimeAdopters(AmendmentstoIFRS1)(oilandgasassets,leases).Clickformoreinformation.


QuickArticleLinks

http://www.iasplus.com/en/news/2002/July/news432http://www.iasplus.com/en/news/2005/June/news2140http://www.iasplus.com/en/news/2009/July/news4935http://www.iasplus.com/en/news/2008/November/news4332http://www.iasplus.com/en/news/2003/June/news923http://www.iasplus.com/en/projects/completed/fta/first-time-adoptionhttp://www.iasplus.com/en/news/2008/May/news4275http://www.iasplus.com/en/news/2005/June/news2140



29January2010 AmendedbyLimitedExemptionfromComparativeIFRS7DisclosuresforFirsttimeAdopters(AmendmenttoIFRS1).Clickformoreinformation

Effectivefororannualperiodsbeginningonorafter1July2010

6May2010 AmendedbyImprovementstoIFRSs(accountingpolicieschanges,revaluationbasisasdeemedcost,rateregulation)

Effectiveforannualperiodsbeginningonorafter1July2011

20December2010 AmendedbySevereHyperinflationandRemovalofFixedDatesforFirsttimeAdopters(AmendmenttoIFRS1).Clickformoreinformation


13March2012 AmendedbyGovernmentLoans(AmendmentstoIFRS1).Clickformoreinformation


17May2012 AmendedbyAnnualImprovements20092011Cycle(repeatapplication,borrowingcosts).Clickformoreinformation


12December2013 AmendedbyAnnualImprovementstoIFRSs20112013Cycle(meaningofeffectiveIFRSs).Clickformoreinformation

Amendmenttobasisforconclusionsonly

Note:Theabovesummarydoesnotincludedetailsofconsequentialamendmentsmadeastheresultofotherprojects.

RelatedInterpretationsIFRS1supersedesSIC8FirsttimeApplicationofIASsasthePrimaryBasisofAccounting

AmendmentsunderconsiderationNonenoted

DeloitteGuidetoIFRS1(November2009)

InNovember2009,Deloitte'sIFRSGlobalOfficepublishedarevisedGuidetoIFRS1FirsttimeAdoptionofInternationalFinancialReportingStandards.Theguidewasfirstpublishedin2004withtheaimofprovidingfirsttimeadopterswithhelpfulinsightsfortheapplicationofIFRS1.Thissecondeditionhasthesameobjective.WehaveupdatedthecontenttoreflectthelessonslearnedfromthefirstmajorwaveofIFRSadoptionin2005,aswellasforthechangestoIFRS1since2004.Wehavestructuredtheguidetoprovideuserswithanaccessiblereferencemanual:

http://www.iasplus.com/en/news/2010/May/news6089http://www.iasplus.com/en/projects/completed/fta/government-loanshttp://www.iasplus.com/en/news/2012/march/iasb-issues-amendment-to-ifrs-1-regarding-government-loanshttp://www.iasplus.com/en/news/2013/12/aip-2011-2013http://www.iasplus.com/en/news/2010/January/news5728http://www.iasplus.com/en/news/2012/may/iasb-concludes-the-2009-2011-annual-improvements-cyclehttp://www.iasplus.com/en/news/2010/December/news5595http://www.iasplus.com/en/projects/completed/aip/annual-improvements-2009-2011http://www.iasplus.com/en/standards/sic/sic-8http://www.iasplus.com/en/projects/completed/aip/annual-improvements-2011-2013http://www.iasplus.com/en/projects/completed/aip/annual-improvements-2008-2010



AnexecutivesummaryexplainsthemostimportantfeaturesofIFRS1

Section2providesanoverviewoftherequirementsoftheStandard

Sections3and4coverthespecificexceptionsandexemptionsfromIFRS1'sgeneralprincipleofretrospectiveapplicationofIFRSs,focusingonkeyimplementationissues

Section5addressesothercomponentsoffinancialstatementswhereimplementationissuesfrequentlyariseinpractice

Section6setsoutQ&Asdealingwithspecificfactpatternsthatusersmayencounterinpracticeand

Section7discussessomeofthepracticalimplementationdecisionsfacedbyfirsttimeadopters.

ClicktoDownloadDeloitte'sGuidetoIFRS1(PDF435k)

SummaryofIFRS1Objective

IFRS1FirsttimeAdoptionofInternationalFinancialReportingStandardssetsouttheproceduresthatanentitymustfollowwhenitadoptsIFRSsforthefirsttimeasthebasisforpreparingitsgeneralpurposefinancialstatements.

Note:AnentitythatconductsrateregulatedactivitiesandhasrecognisedamountsinitspreviousGAAPfinancialstatementsthatmeetthedefinitionof'regulatorydeferralaccountbalances'(sometimesreferredto'regulatoryassets'and'regulatoryliabilities')canoptionallyapplyIFRS14RegulatoryDeferralAccountsinadditiontoIFRS1.AnentitythatelectstoapplyIFRS14initsfirstIFRSfinancialstatementsmustcontinuetoapplyitinsubsequentfinancialstatements.

Definitionoffirsttimeadoption

Afirsttimeadopterisanentitythat,forthefirsttime,makesanexplicitandunreservedstatementthatitsgeneralpurposefinancialstatementscomplywithIFRSs.[IFRS1.3]

Anentitymaybeafirsttimeadopterif,intheprecedingyear,itpreparedIFRSfinancialstatementsforinternalmanagementuse,aslongasthoseIFRSfinancialstatementswerenotmadeavailabletoownersorexternalpartiessuchasinvestorsorcreditors.IfasetofIFRSfinancialstatementswas,foranyreason,madeavailabletoownersorexternalpartiesintheprecedingyear,thentheentitywillalreadybeconsideredtobeonIFRSs,andIFRS1doesnotapply.[IFRS1.3]

Anentitycanalsobeafirsttimeadopterif,intheprecedingyear,itsfinancialstatements:[IFRS1.3]

assertedcompliancewithsomebutnotallIFRSs,or

includedonlyareconciliationofselectedfiguresfrompreviousGAAPtoIFRSs.(PreviousGAAPmeanstheGAAPthatanentityfollowedimmediatelybeforeadoptingtoIFRSs.)

However,anentityisnotafirsttimeadopterif,intheprecedingyear,itsfinancialstatementsasserted:

CompliancewithIFRSseveniftheauditor'sreportcontainedaqualificationwithrespecttoconformitywithIFRSs.

http://www.iasplus.com/en/standards/ifrs/ifrs14http://www.iasplus.com/en/publications/global/guides/pub2712



CompliancewithbothpreviousGAAPandIFRSs.

AnentitythatappliedIFRSsinapreviousreportingperiod,butwhosemostrecentpreviousannualfinancialstatementsdidnotcontainanexplicitandunreservedstatementofcompliancewithIFRSscanchooseto:

applytherequirementsofIFRS1(includingthevariouspermittedexemptionstofullretrospectiveapplication),or

retrospectivelyapplyIFRSsinaccordancewithIAS8AccountingPolicies,ChangesinAccountingEstimatesandErrors,asifitneverstoppedapplyingIFRSs.[IFRS1.4A]

OverviewforanentitythatadoptsIFRSsforthefirsttimeinitsannualfinancialstatementsfortheyearended31December2014

Accountingpolicies

SelectaccountingpoliciesbasedonIFRSseffectiveat31December2014.

IFRSreportingperiods

Prepareatleast2014and2013financialstatementsandtheopeningbalancesheet(asof1January2012orbeginningofthefirstperiodforwhichfullcomparativefinancialstatementsarepresented,ifearlier)byapplyingtheIFRSseffectiveat31December2014.[IFRS1.7]

SinceIAS1requiresthatatleastoneyearofcomparativepriorperiodfinancialinformationbepresented,theopeningbalancesheetwillbe1January2012ifnotearlier.Thiswouldmeanthatanentity'sfirstfinancialstatementsshouldincludeatleast:[IFRS1.21]

threestatementsoffinancialposition

twostatementsofprofitorlossandothercomprehensiveincome

twoseparatestatementsofprofitorloss(ifpresented)

twostatementsofcashflows

twostatementsofchangesinequity,and

relatednotes,includingcomparativeinformation

Ifa31December2014adopterreportsselectedfinancialdata(butnotfullfinancialstatements)onanIFRSbasisforperiodspriorto2013,inadditiontofullfinancialstatementsfor2014and2013,thatdoesnotchangethefactthatitsopeningIFRSbalancesheetisasof1January2012.

AdjustmentsrequiredtomovefrompreviousGAAPtoIFRSsatthetimeoffirsttimeadoption

DerecognitionofsomepreviousGAAPassetsandliabilities

TheentityshouldeliminatepreviousGAAPassetsandliabilitiesfromtheopeningbalancesheetiftheydonotqualifyforrecognitionunderIFRSs.[IFRS1.10(b)]Forexample:

IAS38doesnotpermitrecognitionofexpenditureonanyofthefollowingasanintangibleasset:research

startup,preoperating,andpreopeningcosts

training

advertisingandpromotion

http://www.iasplus.com/en/standards/ias/ias8



movingandrelocation

Iftheentity'spreviousGAAPhadrecognisedtheseasassets,theyareeliminatedintheopeningIFRSbalancesheet

Iftheentity'spreviousGAAPhadallowedaccrualofliabilitiesfor"generalreserves",restructurings,futureoperatinglosses,ormajoroverhaulsthatdonotmeettheconditionsforrecognitionasaprovisionunderIAS37,theseareeliminatedintheopeningIFRSbalancesheet

Iftheentity'spreviousGAAPhadallowedrecognitionofcontingentassetsasdefinedinIAS37.10,theseareeliminatedintheopeningIFRSbalancesheet

RecognitionofsomeassetsandliabilitiesnotrecognisedunderpreviousGAAP

Conversely,theentityshouldrecogniseallassetsandliabilitiesthatarerequiredtoberecognisedbyIFRSeveniftheywereneverrecognisedunderpreviousGAAP.[IFRS1.10(a)]Forexample:

IAS39requiresrecognitionofallderivativefinancialassetsandliabilities,includingembeddedderivatives.ThesewerenotrecognisedundermanylocalGAAPs.

IAS19requiresanemployertorecognisealiabilitywhenanemployeehasprovidedserviceinexchangeforbenefitstobepaidinthefuture.Thesearenotjustpostemploymentbenefits(e.g.,pensionplans)butalsoobligationsformedicalandlifeinsurance,vacations,terminationbenefits,anddeferredcompensation.Inthecaseof'overfunded'definedbenefitplans,thiswouldbeaplanasset.

IAS37requiresrecognitionofprovisionsasliabilities.Examplescouldincludeanentity'sobligationsforrestructurings,onerouscontracts,decommissioning,remediation,siterestoration,warranties,guarantees,andlitigation.

DeferredtaxassetsandliabilitieswouldberecognisedinconformitywithIAS12.

Reclassification

TheentityshouldreclassifypreviousGAAPopeningbalancesheetitemsintotheappropriateIFRSclassification.[IFRS1.10(c)]Examples:

IAS10doesnotpermitclassifyingdividendsdeclaredorproposedafterthebalancesheetdateasaliabilityatthebalancesheetdate.IfsuchliabilitywasrecognisedunderpreviousGAAPitwouldbereversedintheopeningIFRSbalancesheet.

Iftheentity'spreviousGAAPhadallowedtreasurystock(anentity'sownsharesthatithadpurchased)tobereportedasanasset,itwouldbereclassifiedasacomponentofequityunderIFRS.

ItemsclassifiedasidentifiableintangibleassetsinabusinesscombinationaccountedforunderthepreviousGAAPmayberequiredtobereclassifiedasgoodwillunderIFRS3becausetheydonotmeetthedefinitionofanintangibleassetunderIAS38.Theconversemayalsobetrueinsomecases.

IAS32hasprinciplesforclassifyingitemsasfinancialliabilitiesorequity.ThusmandatorilyredeemablepreferredsharesthatmayhavebeenclassifiedasequityunderpreviousGAAPwouldbereclassifiedasliabilitiesintheopeningIFRSbalancesheet.NotethatIFRS1makesanexceptionfromthe"splitaccounting"provisionsofIAS32.Iftheliabilitycomponentofacompoundfinancialinstrumentisnolongeroutstandingatthedateofthe

http://www.iasplus.com/en/standards/ias/ias38http://www.iasplus.com/en/standards/ias/ias10http://www.iasplus.com/en/standards/ias/ias32http://www.iasplus.com/en/standards/ifrs/ifrs3



openingIFRSbalancesheet,theentityisnotrequiredtoreclassifyoutofretainedearningsandintootherequitytheoriginalequitycomponentofthecompoundinstrument.

ThereclassificationprinciplewouldapplyforthepurposeofdefiningreportablesegmentsunderIFRS8.

Someoffsetting(netting)ofassetsandliabilitiesorofincomeandexpenseitemsthathadbeenacceptableunderpreviousGAAPmaynolongerbeacceptableunderIFRS.

Measurement

ThegeneralmeasurementprinciplethereareseveralsignificantexceptionsnotedbelowistoapplyeffectiveIFRSsinmeasuringallrecognisedassetsandliabilities.[IFRS1.10(d)]

HowtorecogniseadjustmentsrequiredtomovefrompreviousGAAPtoIFRSs

AdjustmentsrequiredtomovefrompreviousGAAPtoIFRSsatthedateoftransitionshouldberecogniseddirectlyinretainedearningsor,ifappropriate,anothercategoryofequityatthedateoftransitiontoIFRSs.[IFRS1.11]

Estimates

InpreparingIFRSestimatesatthedateoftransitiontoIFRSsretrospectively,theentitymustusetheinputsandassumptionsthathadbeenusedtodeterminepreviousGAAPestimatesasofthatdate(afteradjustmentstoreflectanydifferencesinaccountingpolicies).TheentityisnotpermittedtouseinformationthatbecameavailableonlyafterthepreviousGAAPestimatesweremadeexcepttocorrectanerror.[IFRS1.14]

Changestodisclosures

Formanyentities,newareasofdisclosurewillbeaddedthatwerenotrequirementsunderthepreviousGAAP(perhapssegmentinformation,earningspershare,discontinuingoperations,contingenciesandfairvaluesofallfinancialinstruments)anddisclosuresthathadbeenrequiredunderpreviousGAAPwillbebroadened(perhapsrelatedpartydisclosures).

DisclosureofselectedfinancialdataforperiodsbeforethefirstIFRSstatementoffinancialposition(balancesheet)

IfafirsttimeadopterwantstodiscloseselectedfinancialinformationforperiodsbeforethedateoftheopeningIFRSbalancesheet,itisnotrequiredtoconformthatinformationtoIFRS.ConformingthatearlierselectedfinancialinformationtoIFRSsisoptional.[IFRS1.22]

IftheentityelectstopresenttheearlierselectedfinancialinformationbasedonitspreviousGAAPratherthanIFRS,itmustprominentlylabelthatearlierinformationasnotcomplyingwithIFRSand,further,itmustdisclosethenatureofthemainadjustmentsthatwouldmakethatinformationcomplywithIFRS.Thislatterdisclosureisnarrativeandnotnecessarilyquantified.[IFRS1.22]

Disclosuresinthefinancialstatementsofafirsttimeadopter

IFRS1requiresdisclosuresthatexplainhowthetransitionfrompreviousGAAPtoIFRSaffectedtheentity'sreportedfinancialposition,financialperformanceandcashflows.[IFRS1.23]Thisincludes:

1. reconciliationsofequityreportedunderpreviousGAAPtoequityunderIFRSboth(a)atthedateoftransitiontoIFRSsand(b)theendofthelastannualperiodreportedunderthepreviousGAAP.[IFRS1.24(a)](ForanentityadoptingIFRSsforthefirsttimeinits31December2014financialstatements,

http://www.iasplus.com/en/standards/ifrs/ifrs8



thereconciliationswouldbeasof1January2012and31December2013.)

2. reconciliationsoftotalcomprehensiveincomeforthelastannualperiodreportedunderthepreviousGAAPtototalcomprehensiveincomeunderIFRSsforthesameperiod[IFRS1.24(b)]

3. explanationofmaterialadjustmentsthatweremade,inadoptingIFRSsforthefirsttime,tothestatementoffinancialposition,statementofcomprehensiveincomeandstatementofcashflows(thelatterifpresentedunderpreviousGAAP)[IFRS1.25]

4. iferrorsinpreviousGAAPfinancialstatementswerediscoveredinthecourseoftransitiontoIFRSs,thosemustbeseparatelydisclosed[IFRS1.26]

5. iftheentityrecognisedorreversedanyimpairmentlossesinpreparingitsopeningIFRSbalancesheet,thesemustbedisclosed[IFRS1.24(c)]

6. appropriateexplanationsiftheentityhaselectedtoapplyanyofthespecificrecognitionandmeasurementexemptionspermittedunderIFRS1forinstance,ifitusedfairvaluesasdeemedcost

Disclosuresininterimfinancialreports

IfanentityisgoingtoadoptIFRSsforthefirsttimeinitsannualfinancialstatementsfortheyearended31December2014,certaindisclosurearerequiredinitsinterimfinancialstatementspriortothe31December2014statements,butonlyifthoseinterimfinancialstatementspurporttocomplywithIAS34InterimFinancialReporting.ExplanatoryinformationandareconciliationarerequiredintheinterimreportthatimmediatelyprecedesthefirstsetofIFRSannualfinancialstatements.TheinformationincludesreconciliationsbetweenIFRSandpreviousGAAP.[IFRS1.32]

ExceptionstotheretrospectiveapplicationofotherIFRSs

Priorto1January2010,therewerethreeexceptionstothegeneralprincipleofretrospectiveapplication.On23July2009,IFRS1wasamended,effective1January2010,toaddtwoadditionalexceptionswiththegoaloffurthersimplifyingthetransitiontoIFRSsforfirsttimeadopters.Thefiveexceptionsare:[IFRS1.AppendixB]

IAS39Derecognitionoffinancialinstruments

AfirsttimeadoptershallapplythederecognitionrequirementsinIAS39prospectivelyfortransactionsoccurringonorafter1January2004.However,theentitymayapplythederecognitionrequirementsretrospectivelyprovidedthattheneededinformationwasobtainedatthetimeofinitiallyaccountingforthosetransactions.[IFRS1.B23]

IAS39Hedgeaccounting

ThegeneralruleisthattheentityshallnotreflectinitsopeningIFRSbalancesheet(statementoffinancialposition)ahedgingrelationshipofatypethatdoesnotqualifyforhedgeaccountinginaccordancewithIAS39.However,ifanentitydesignatedanetpositionasahedgediteminaccordancewithpreviousGAAP,itmaydesignateanindividualitemwithinthatnetpositionasahedgediteminaccordancewithIFRS,providedthatitdoessonolaterthanthedateoftransitiontoIFRSs.[IFRS1.B5]

Note:ModifiedrequirementsapplywhenanentityappliesIFRS9FinancialInstruments(2013).

IAS27Noncontrollinginterest

IFRS1.B7listsspecificrequirementsofIFRS10ConsolidatedFinancialStatementsthatshallbeapplied

http://www.iasplus.com/en/standards/ifrs/ifrs10http://www.iasplus.com/en/standards/ifrs/ifrs9



prospectively.

Fullcostoilandgasassets

EntitiesusingthefullcostmethodmayelectexemptionfromretrospectiveapplicationofIFRSsforoilandgasassets.EntitieselectingthisexemptionwillusethecarryingamountunderitsoldGAAPasthedeemedcostofitsoilandgasassetsatthedateoffirsttimeadoptionofIFRSs.

Determiningwhetheranarrangementcontainsalease

IfafirsttimeadopterwithaleasingcontractmadethesametypeofdeterminationofwhetheranarrangementcontainedaleaseinaccordancewithpreviousGAAPasthatrequiredbyIFRIC4DeterminingwhetheranArrangementContainsaLease,butatadateotherthanthatrequiredbyIFRIC4,theamendmentsexempttheentityfromhavingtoapplyIFRIC4whenitadoptsIFRSs.

OptionalexemptionsfromthebasicmeasurementprincipleinIFRS1

Therearesomefurtheroptionalexemptionstothegeneralrestatementandmeasurementprinciplessetoutabove.Thefollowingexceptionsareindividuallyoptional.Theyrelateto:

businesscombinations[IFRS1.AppendixC]

andanumberofothers[IFRS1.AppendixD]:sharebasedpaymenttransactions

insurancecontracts

fairvalue,previouscarryingamount,orrevaluationasdeemedcost

leases

cumulativetranslationdifferences

investmentsinsubsidiaries,jointlycontrolledentities,associatesandjointventures

assetsandliabilitiesofsubsidiaries,associatedandjointventures

compoundfinancialinstruments

designationofpreviouslyrecognisedfinancialinstruments

fairvaluemeasurementoffinancialassetsorfinancialliabilitiesatinitialrecognition

decommissioningliabilitiesincludedinthecostofproperty,plantandequipment

financialassetsorintangibleassetsaccountedforinaccordancewithIFRIC12ServiceConcessionArrangements

borrowingcosts

transfersofassetsfromcustomers

extinguishingfinancialliabilitieswithequityinstruments

severehyperinflation

jointarrangements

strippingcostsintheproductionphaseofasurfacemine

Some,butnotall,ofthemaredescribedbelow.

Businesscombinationsthatoccurredbeforeopeningbalancesheetdate

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IFRS1includesAppendixCexplaininghowafirsttimeadoptershouldaccountforbusinesscombinationsthatoccurredpriortotransitiontoIFRS.

AnentitymaykeeptheoriginalpreviousGAAPaccounting,thatis,notrestate:

previousmergersorgoodwillwrittenofffromreserves

thecarryingamountsofassetsandliabilitiesrecognisedatthedateofacquisitionormerger,or

howgoodwillwasinitiallydetermined(donotadjustthepurchasepriceallocationonacquisition)

However,shoulditwishtodoso,anentitycanelecttorestateallbusinesscombinationsstartingfromadateitselectspriortotheopeningbalancesheetdate.

Inallcases,theentitymustmakeaninitialIAS36impairmenttestofanyremaininggoodwillintheopeningIFRSbalancesheet,afterreclassifying,asappropriate,previousGAAPintangiblestogoodwill.

Theexemptionforbusinesscombinationsalsoappliestoacquisitionsofinvestmentsinassociates,interestsinjointventuresandinterestsinajointoperationwhentheoperationconstitutesabusiness.

Deemedcost

Assetscarriedatcost(e.g.property,plantandequipment)maybemeasuredattheirfairvalueatthedateoftransitiontoIFRSs.Fairvaluebecomesthe'deemedcost'goingforwardundertheIFRScostmodel.Deemedcostisanamountusedasasurrogateforcostordepreciatedcostatagivendate.[IFRS1.D6]

If,beforethedateofitsfirstIFRSbalancesheet,theentityhadrevaluedanyoftheseassetsunderitspreviousGAAPeithertofairvalueortoapriceindexadjustedcost,thatpreviousGAAPrevaluedamountatthedateoftherevaluationcanbecomethedeemedcostoftheassetunderIFRS.[IFRS1.D6]

If,beforethedateofitsfirstIFRSbalancesheet,theentityhadmadeaonetimerevaluationofassetsorliabilitiestofairvaluebecauseofaprivatisationorinitialpublicoffering,andtherevaluedamountbecamedeemedcostunderthepreviousGAAP,thatamountwouldcontinuetobedeemedcostaftertheinitialadoptionofIFRS.[IFRS1.D8]

Thisoptionappliestointangibleassetsonlyifanactivemarketexists.[IFRS1.D7]

Ifthecarryingamountofproperty,plantandequipmentorintangibleassetsthatareusedinrateregulatedactivitiesincludesamountsunderpreviousGAAPthatdonotqualifyforcapitalisationinaccordancewithIFRSs,afirsttimeadoptermayelecttousethepreviousGAAPcarryingamountofsuchitemsasdeemedcostontheinitialadoptionofIFRSs.[IFRS1.D8B]

EligibleentitiessubjecttorateregulationmayalsooptionallyapplyIFRS14RegulatoryDeferralAccountsontransitiontoIFRSs,andinsubsequentfinancialstatements.

IAS19Employeebenefits:actuarialgainsandlosses

AnentitymayelecttorecogniseallcumulativeactuarialgainsandlossesforalldefinedbenefitplansattheopeningIFRSbalancesheetdate(thatis,resetanycorridorrecognisedunderpreviousGAAPtozero),evenifitelectstousetheIAS19corridorapproachforactuarialgainsandlossesthatariseafter

http://www.iasplus.com/en/standards/ias/ias36http://www.iasplus.com/en/standards/ifrs/ifrs14



firsttimeadoptionofIFRS.Ifafirsttimeadopterusesthisexemption,itshallapplyittoallplans.[IFRS1.D10]

Note:ThisexemptionisnotavailablewhereIAS19EmployeeBenefits(2011)isapplied.IAS19(2011)iseffectiveforannualreportingperiodsbeginningonorafter1January2013.

IAS21Accumulatedtranslationreserves

AnentitymayelecttorecognisealltranslationadjustmentsarisingonthetranslationofthefinancialstatementsofforeignentitiesinaccumulatedprofitsorlossesattheopeningIFRSbalancesheetdate(thatis,resetthetranslationreserveincludedinequityunderpreviousGAAPtozero).Iftheentityelectsthisexemption,thegainorlossonsubsequentdisposaloftheforeignentitywillbeadjustedonlybythoseaccumulatedtranslationadjustmentsarisingaftertheopeningIFRSbalancesheetdate.[IFRS1.D13]

IAS27Investmentsinseparatefinancialstatements

InMay2008,theIASBamendedthestandardtochangethewaythecostofaninvestmentintheseparatefinancialstatementsismeasuredonfirsttimeadoptionofIFRSs.TheamendmentstoIFRS1:

allowfirsttimeadopterstousea'deemedcost'ofeitherfairvalueorthecarryingamountunderpreviousaccountingpracticetomeasuretheinitialcostofinvestmentsinsubsidiaries,jointlycontrolledentitiesandassociatesintheseparatefinancialstatements

removethedefinitionofthecostmethodfromIAS27andaddarequirementtopresentdividendsasincomeintheseparatefinancialstatementsoftheinvestor

requirethat,whenanewparentisformedinareorganisation,thenewparentmustmeasurethecostofitsinvestmentinthepreviousparentatthecarryingamountofitsshareoftheequityitemsofthepreviousparentatthedateofthereorganisation

Assetsandliabilitiesofsubsidiaries,associatesandjointventures:differentIFRSadoptiondatesofinvestorandinvestee

Ifasubsidiarybecomesafirsttimeadopterlaterthanitsparent,IFRS1permitsachoicebetweentwomeasurementbasesinthesubsidiary'sseparatefinancialstatements.Inthiscase,asubsidiaryshouldmeasureitsassetsandliabilitiesaseither:[IFRS1.D16]

thecarryingamountthatwouldbeincludedintheparent'sconsolidatedfinancialstatements,basedontheparent'sdateoftransitiontoIFRSs,ifnoadjustmentsweremadeforconsolidationproceduresandfortheeffectsofthebusinesscombinationinwhichtheparentacquiredthesubsidiaryor

thecarryingamountsrequiredbyIFRS1basedonthesubsidiary'sdateoftransitiontoIFRSs

Asimilarelectionisavailabletoanassociateorjointventurethatbecomesafirsttimeadopterlaterthananentitythathassignificantinfluenceorjointcontroloverit.[IFRS1.D16]

Ifaparentbecomesafirsttimeadopterlaterthanitssubsidiary,theparentshouldinitsconsolidatedfinancialstatements,measuretheassetsandliabilitiesofthesubsidiaryatthesamecarryingamountasintheseparatefinancialstatementsofthesubsidiary,afteradjustingforconsolidationadjustmentsandfortheeffectsofthebusinesscombinationinwhichtheparentacquiredthesubsidiary.Thesameapproachappliesinthecaseofassociatesandjointventures.[IFRS1.D17]



ContactusAboutLegalPrivacyFAQsMaterialonthiswebsiteis2015DeloitteGlobalServicesLimited,oramemberfirmofDeloitteTouche

5

July2009:TwoAmendmentstoIFRS1

On23July2009,theIASBamendedIFRS1to:

exemptentitiesusingthefullcostmethodfromretrospectiveapplicationofIFRSsforoilandgasassets.

exemptentitieswithexistingleasingcontractsfromreassessingtheclassificationofthosecontractsinaccordancewithIFRIC4DeterminingwhetheranArrangementcontainsaLeasewhentheapplicationoftheirnationalaccountingrequirementsproducedthesameresult.

ClickforIASBPressRelease(PDF104k).

November2009:ProposedLimitedScopeExemptionforIFRS7Disclosures

On26November2009,theIASBissuedanexposuredraft(ED)proposingtoamendIFRS1tostatethatanentityneednotprovidethecomparativepriorperiodinformationrequiredbytheMarch2009amendmentstoIFRS7ImprovingDisclosuresaboutFinancialInstrumentsforfirsttimeadoptersadoptingbefore1January2010.Asaresult,IFRS1,AppendixE,paragraphE1willbeamendedasfollows:

E1Afirsttimeadoptermayapplythetransitionalprovisionsinparagraph44GofIFRS7totheextentthattheentity'sfirstIFRSreportingperiodstartsearlierthan1January2010.

TheproposedlimitedexemptionfromcomparativeIFRS7disclosuresforfirsttimeadoptersisconsistentwiththeexemptionpermittedforearlyadoptersoftheMarch2009amendmentstoIFRS7.DeadlineforcommentsontheEDis29December2009.ClickforIASBPressRelease(PDF101k).

January2010:IASBamendsIFRS1toprovideIFRS7disclosureexemption

On28January2010,theIASBamendedIFRS1toexemptfirsttimeadoptersofIFRSsfromprovidingtheadditionaldisclosuresintroducedinMarch2009byImprovingDisclosuresaboutFinancialInstruments(AmendmentstoIFRS7).TheamendmentgivesfirsttimeadoptersthesametransitionprovisionsthatAmendmentstoIFRS7providestocurrentIFRSpreparers.Theamendmentiseffectiveon1July2010,withearlierapplicationpermitted.ClickforIASBPressRelease(PDF100k).

December2010:TwoAmendmentstoIFRS1

On20December,theIASBamendedIFRS1to:

providereliefforfirsttimeadoptersofIFRSsfromhavingtoreconstructtransactionsthatoccurredbeforetheirdateoftransitiontoIFRSs.

provideguidanceforentitiesemergingfromseverehyperinflationeithertoresumepresentingIFRSfinancialstatementsortopresentIFRSfinancialstatementsforthefirsttime.

ClickforIASBPressRelease(PDF33k).

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TohmatsuLimited,oroneoftheirrelatedentities.SeeLegalforadditionalcopyrightandotherlegalinformation.DeloittereferstooneormoreofDeloitteToucheTohmatsuLimited,aUKprivatecompanylimitedbyguarantee(DTTL),itsnetworkofmemberfirms,andtheirrelatedentities.DTTLandeachofitsmemberfirmsarelegallyseparateandindependententities.DTTL(alsoreferredtoasDeloitteGlobal)doesnotprovideservicestoclients.Pleaseseewww.deloitte.com/aboutforamoredetaileddescriptionofDTTLanditsmemberfirms.

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1/13/2015 IFRS2SharebasedPayment


IFRS2SharebasedPayment

Overview

IFRS2SharebasedPaymentrequiresanentitytorecognisesharebasedpaymenttransactions(suchasgrantedshares,shareoptions,orshareappreciationrights)initsfinancialstatements,includingtransactionswithemployeesorotherpartiestobesettledincash,otherassets,orequityinstrumentsoftheentity.Specificrequirementsareincludedforequitysettledandcashsettledsharebasedpaymenttransactions,aswellasthosewheretheentityorsupplierhasachoiceofcashorequityinstruments.

IFRS2wasoriginallyissuedinFebruary2004andfirstappliedtoannualperiodsbeginningonorafter1January2005.

HistoryofIFRS2Date Development CommentsJuly2000 G4+1DiscussionPaperAccountingforShare

BasedPaymentspublishedCommentdeadline31October2000

July2001 ProjectaddedtoIASBagenda Historyoftheproject20September2001IASBinvitescommentsonG4+1DiscussionPaper

AccountingforShareBasedPaymentsCommentdeadline15December2001

7November2002 ExposureDraftED2ShareBasedPaymentpublished

Commentdeadline7March2003

19February2004 IFRS2SharebasedPaymentissued Effectiveforannualperiodsbeginningonorafter1January2005

2February2006 ExposureDraftVestingConditionsandCancellationspublished

Commentdeadline2June2006

17January2008 AmendedbyVestingConditionsandCancellations(AmendmentstoIFRS2)


16April2009 AmendedbyImprovementstoIFRSs(scopeofIFRS2andrevisedIFRS3)


18June2009 AmendedbyGroupCashsettledSharebasedPaymentTransactions


12December2013 AmendedbyAnnualImprovementstoIFRSs20102012Cycle(definitionofvestingcondition)


RelatedInterpretationsNone

AmendmentsunderconsiderationIFRS2Clarificationsofclassificationandmeasurementofsharebasedpaymenttransactions

QuickArticleLinks

http://www.iasplus.com/en/news/2009/June/news5018http://www.iasplus.com/en/projects/narrow-scope/ifrs-2-classification-measurementhttp://www.iasplus.com/en/news/2006/February/news2676http://www.iasplus.com/en/projects/completed/aip/annual-improvements-2007-2009http://www.iasplus.com/en/news/2013/12/aip-2010-2012http://www.iasplus.com/en/news/2009/April/news4603http://www.iasplus.com/en/news/2004/February/news1316http://www.iasplus.com/en/news/2002/November/news615http://www.iasplus.com/en/projects/completed/aip/annual-improvements-2010-2012http://www.iasplus.com/en/news/2008/January/news4064http://www.iasplus.com/en/news/2001/September/news283



ResearchprojectSharebasedpayments

SummaryofIFRS2

InJune2007,theDeloitteIFRSGlobalOfficepublishedanupdatedversionofourIASPlusGuidetoIFRS2SharebasedPayment2007(PDF748k,128pages).TheguidenotonlyexplainsthedetailedprovisionsofIFRS2butalsodealswithitsapplicationinmanypracticalsituations.Becauseofthecomplexityandvarietyofsharebasedpaymentawardsinpractice,itisnotalwayspossibletobedefinitiveastowhatisthe'right'answer.However,inthisguideDeloitteshareswithyouourapproachtofindingsolutionsthatwebelieveareinaccordancewiththeobjectiveoftheStandard.

SpecialeditionofourIASPlusnewsletter

YouwillfindafourpagesummaryofIFRS2inaspecialeditionofourIASPlusnewsletter(PDF49k).

Definitionofsharebasedpayment

Asharebasedpaymentisatransactioninwhichtheentityreceivesgoodsorserviceseitherasconsiderationforitsequityinstrumentsorbyincurringliabilitiesforamountsbasedonthepriceoftheentity'ssharesorotherequityinstrumentsoftheentity.Theaccountingrequirementsforthesharebasedpaymentdependonhowthetransactionwillbesettled,thatis,bytheissuanceof(a)equity,(b)cash,or(c)equityorcash.

Scope

Theconceptofsharebasedpaymentsisbroaderthanemployeeshareoptions.IFRS2encompassestheissuanceofshares,orrightstoshares,inreturnforservicesandgoods.ExamplesofitemsincludedinthescopeofIFRS2areshareappreciationrights,employeesharepurchaseplans,employeeshareownershipplans,shareoptionplansandplanswheretheissuanceofshares(orrightstoshares)maydependonmarketornonmarketrelatedconditions.

IFRS2appliestoallentities.Thereisnoexemptionforprivateorsmallerentities.Furthermore,subsidiariesusingtheirparent'sorfellowsubsidiary'sequityasconsiderationforgoodsorservicesarewithinthescopeoftheStandard.

Therearetwoexemptionstothegeneralscopeprinciple:

First,theissuanceofsharesinabusinesscombinationshouldbeaccountedforunderIFRS3BusinessCombinations.However,careshouldbetakentodistinguishsharebasedpaymentsrelatedtotheacquisitionfromthoserelatedtocontinuingemployeeservices

Second,IFRS2doesnotaddresssharebasedpaymentswithinthescopeofparagraphs810ofIAS32FinancialInstruments:Presentation,orparagraphs57ofIAS39FinancialInstruments:RecognitionandMeasurement.Therefore,IAS32andIAS39shouldbeappliedforcommoditybasedderivativecontractsthatmaybesettledinsharesorrightstoshares.

IFRS2doesnotapplytosharebasedpaymenttransactionsotherthanfortheacquisitionofgoodsandservices.Sharedividends,thepurchaseoftreasuryshares,andtheissuanceofadditionalsharesarethereforeoutsideitsscope.

http://www.iasplus.com/en/standards/ifrs/ifrs3http://www.iasplus.com/en/publications/global/guides/pub1349http://www.iasplus.com/en/projects/research/long-term/ifrs-2-researchhttp://www.iasplus.com/en/publications/global/ifrs-in-focus/2004/ifrs-2http://www.iasplus.com/en/standards/ias/ias32http://www.iasplus.com/en/standards/ias/ias39



Recognitionandmeasurement

Theissuanceofsharesorrightstosharesrequiresanincreaseinacomponentofequity.IFRS2requirestheoffsettingdebitentrytobeexpensedwhenthepaymentforgoodsorservicesdoesnotrepresentanasset.Theexpenseshouldberecognisedasthegoodsorservicesareconsumed.Forexample,theissuanceofsharesorrightstosharestopurchaseinventorywouldbepresentedasanincreaseininventoryandwouldbeexpensedonlyoncetheinventoryissoldorimpaired.

Theissuanceoffullyvestedshares,orrightstoshares,ispresumedtorelatetopastservice,requiringthefullamountofthegrantdatefairvaluetobeexpensedimmediately.Theissuanceofsharestoemployeeswith,say,athreeyearvestingperiodisconsideredtorelatetoservicesoverthevestingperiod.Therefore,thefairvalueofthesharebasedpayment,determinedatthegrantdate,shouldbeexpensedoverthevestingperiod.

Asageneralprinciple,thetotalexpenserelatedtoequitysettledsharebasedpaymentswillequalthemultipleofthetotalinstrumentsthatvestandthegrantdatefairvalueofthoseinstruments.Inshort,thereistruinguptoreflectwhathappensduringthevestingperiod.However,iftheequitysettledsharebasedpaymenthasamarketrelatedperformancecondition,theexpensewouldstillberecognisedifallothervestingconditionsaremet.Thefollowingexampleprovidesanillustrationofatypicalequitysettledsharebasedpayment.

IllustrationRecognitionofemployeeshareoptiongrant

Companygrantsatotalof100shareoptionsto10membersofitsexecutivemanagementteam(10optionseach)on1January20X5.Theseoptionsvestattheendofathreeyearperiod.Thecompanyhasdeterminedthateachoptionhasafairvalueatthedateofgrantequalto15.Thecompanyexpectsthatall100optionswillvestandthereforerecordsthefollowingentryat30June20X5theendofitsfirstsixmonthinterimreportingperiod.

Dr.Shareoptionexpense 250Cr.Equity 250[(10015)6periods]=250perperiod

Ifall100sharesvest,theaboveentrywouldbemadeattheendofeach6monthreportingperiod.However,ifonememberoftheexecutivemanagementteamleavesduringthesecondhalfof20X6,thereforeforfeitingtheentireamountof10options,thefollowingentryat31December20X6wouldbemade:

Dr.Shareoptionexpense 150Cr.Equity 150[(9015)6periods=225perperiod.[2254][250+250+250]=150

Measurementguidance

Dependingonthetypeofsharebasedpayment,fairvaluemaybedeterminedbythevalueofthesharesorrightstosharesgivenup,orbythevalueofthegoodsorservicesreceived:

Generalfairvaluemeasurementprinciple.Inprinciple,transactionsinwhichgoodsorservicesarereceivedasconsiderationforequityinstrumentsoftheentityshouldbemeasuredatthefairvalueofthegoodsorservicesreceived.Onlyifthefairvalueofthegoodsorservicescannotbemeasuredreliablywouldthefairvalueoftheequityinstrumentsgrantedbeused.



Measuringemployeeshareoptions.Fortransactionswithemployeesandothersprovidingsimilarservices,theentityisrequiredtomeasurethefairvalueoftheequityinstrumentsgranted,becauseitistypicallynotpossibletoestimatereliablythefairvalueofemployeeservicesreceived.

Whentomeasurefairvalueoptions.Fortransactionsmeasuredatthefairvalueoftheequityinstrumentsgranted(suchastransactionswithemployees),fairvalueshouldbeestimatedatgrantdate.

Whentomeasurefairvaluegoodsandservices.Fortransactionsmeasuredatthefairvalueofthegoodsorservicesreceived,fairvalueshouldbeestimatedatthedateofreceiptofthosegoodsorservices.

Measurementguidance.Forgoodsorservicesmeasuredbyreferencetothefairvalueoftheequityinstrumentsgranted,IFRS2specifiesthat,ingeneral,vestingconditionsarenottakenintoaccountwhenestimatingthefairvalueofthesharesoroptionsattherelevantmeasurementdate(asspecifiedabove).Instead,vestingconditionsaretakenintoaccountbyadjustingthenumberofequityinstrumentsincludedinthemeasurementofthetransactionamountsothat,ultimately,theamountrecognisedforgoodsorservicesreceivedasconsiderationfortheequityinstrumentsgrantedisbasedonthenumberofequityinstrumentsthateventuallyvest.

Moremeasurementguidance.IFRS2requiresthefairvalueofequityinstrumentsgrantedtobebasedonmarketprices,ifavailable,andtotakeintoaccountthetermsandconditionsuponwhichthoseequityinstrumentsweregranted.Intheabsenceofmarketprices,fairvalueisestimatedusingavaluationtechniquetoestimatewhatthepriceofthoseequityinstrumentswouldhavebeenonthemeasurementdateinanarm'slengthtransactionbetweenknowledgeable,willingparties.Thestandarddoesnotspecifywhichparticularmodelshouldbeused.

Iffairvaluecannotbereliablymeasured.IFRS2requiresthesharebasedpaymenttransactiontobemeasuredatfairvalueforbothlistedandunlistedentities.IFRS2permitstheuseofintrinsicvalue(thatis,fairvalueoftheshareslessexerciseprice)inthose"rarecases"inwhichthefairvalueoftheequityinstrumentscannotbereliablymeasured.Howeverthisisnotsimplymeasuredatthedateofgrant.Anentitywouldhavetoremeasureintrinsicvalueateachreportingdateuntilfinalsettlement.

Performanceconditions.IFRS2makesadistinctionbetweenthehandlingofmarketbasedperformanceconditionsfromnonmarketperformanceconditions.Marketconditionsarethoserelatedtothemarketpriceofanentity'sequity,suchasachievingaspecifiedsharepriceoraspecifiedtargetbasedonacomparisonoftheentity'ssharepricewithanindexofsharepricesofotherentities.Marketbasedperformanceconditionsareincludedinthegrantdatefairvaluemeasurement(similarly,nonvestingconditionsaretakenintoaccountinthemeasurement).However,thefairvalueoftheequityinstrumentsisnotadjustedtotakeintoconsiderationnonmarketbasedperformancefeaturestheseareinsteadtakenintoaccountbyadjustingthenumberofequityinstrumentsincludedinthemeasurementofthesharebasedpaymenttransaction,andareadjustedeachperioduntilsuchtimeastheequityinstrumentsvest.

Note:AnnualImprovementstoIFRSs20102012Cycleamendsthedefinitionsof'vestingcondition'and'marketcondition'andaddsdefinitionsfor'performancecondition'and'servicecondition'(whichwerepreviouslypartofthedefinitionof'vestingcondition').Theamendmentsareeffectiveforannualperiodsbeginningonorafter1July2014.

http://www.iasplus.com/en/projects/completed/aip/annual-improvements-2010-2012



Modifications,cancellations,andsettlements

Thedeterminationofwhetherachangeintermsandconditionshasaneffectontheamountrecogniseddependsonwhetherthefairvalueofthenewinstrumentsisgreaterthanthefairvalueoftheoriginalinstruments(bothdeterminedatthemodificationdate).

Modificationofthetermsonwhichequityinstrumentsweregrantedmayhaveaneffectontheexpensethatwillberecorded.IFRS2clarifiesthattheguidanceonmodificationsalsoappliestoinstrumentsmodifiedaftertheirvestingdate.Ifthefairvalueofthenewinstrumentsismorethanthefairvalueoftheoldinstruments(e.g.byreductionoftheexercisepriceorissuanceofadditionalinstruments),theincrementalamountisrecognisedovertheremainingvestingperiodinamannersimilartotheoriginalamount.Ifthemodificationoccursafterthevestingperiod,theincrementalamountisrecognisedimmediately.Ifthefairvalueofthenewinstrumentsislessthanthefairvalueoftheoldinstruments,theoriginalfairvalueoftheequityinstrumentsgrantedshouldbeexpensedasifthemodificationneveroccurred.

Thecancellationorsettlementofequityinstrumentsisaccountedforasanaccelerationofthevestingperiodandthereforeanyamountunrecognisedthatwouldotherwisehavebeenchargedshouldberecognisedimmediately.Anypaymentsmadewiththecancellationorsettlement(uptothefairvalueoftheequityinstruments)shouldbeaccountedforastherepurchaseofanequityinterest.Anypaymentinexcessofthefairvalueoftheequityinstrumentsgrantedisrecognisedasanexpense

Newequityinstrumentsgrantedmaybeidentifiedasareplacementofcancelledequityinstruments.Inthosecases,thereplacementequityinstrumentsareaccountedforasamodification.Thefairvalueofthereplacementequityinstrumentsisdeterminedatgrantdate,whilethefairvalueofthecancelledinstrumentsisdeterminedatthedateofcancellation,lessanycashpaymentsoncancellationthatisaccountedforasadeductionfromequity.

Disclosure

Requireddisclosuresinclude:

thenatureandextentofsharebasedpaymentarrangementsthatexistedduringtheperiod

howthefairvalueofthegoodsorservicesreceived,orthefairvalueoftheequityinstrumentsgranted,duringtheperiodwasdetermined

theeffectofsharebasedpaymenttransactionsontheentity'sprofitorlossfortheperiodandonitsfinancialposition.

Effectivedate

IFRS2iseffectiveforannualperiodsbeginningonorafter1January2005.Earlierapplicationisencouraged.

Transition

Allequitysettledsharebasedpaymentsgrantedafter7November2002,thatarenotyetvestedattheeffectivedateofIFRS2shallbeaccountedforusingtheprovisionsofIFRS2.Entitiesareallowedandencouraged,butnotrequired,toapplythisIFRStoothergrantsofequityinstrumentsif(andonlyif)theentityhaspreviouslydisclosedpubliclythefairvalueofthoseequityinstrumentsdeterminedinaccordancewithIFRS2.

ThecomparativeinformationpresentedinaccordancewithIAS1shallberestatedforallgrantsofequity



instrumentstowhichtherequirementsofIFRS2areapplied.Theadjustmenttoreflectthischangeispresentedintheopeningbalanceofretainedearningsfortheearliestperiodpresented.

IFRS2amendsparagraph13ofIFRS1FirsttimeAdoptionofInternationalFinancialReportingStandardstoaddanexemptionforsharebasedpaymenttransactions.SimilartoentitiesalreadyapplyingIFRS,firsttimeadopterswillhavetoapplyIFRS2forsharebasedpaymenttransactionsonorafter7November2002.Additionally,afirsttimeadopterisnotrequiredtoapplyIFRS2tosharebasedpaymentsgrantedafter7November2002thatvestedbeforethelaterof(a)thedateoftransitiontoIFRSand(b)1January2005.AfirsttimeadoptermayelecttoapplyIFRS2earlieronlyifithaspubliclydisclosedthefairvalueofthesharebasedpaymentsdeterminedatthemeasurementdateinaccordancewithIFRS2.

DifferenceswithFASBStatement123Revised2004

InDecember2004,theUSFASBpublishedFASBStatement123(revised2004)ShareBasedPayment.Statement123(R)requiresthatthecompensationcostrelatingtosharebasedpaymenttransactionsberecognisedinfinancialstatements.ClickforFASBPressRelease(PDF17k).Deloitte(USA)haspublishedaspecialissueofitsHeadsUpnewslettersummarisingthekeyconceptsofFASBStatementNo.123(R).ClicktodownloadtheHeadsUpNewsletter(PDF292k).WhileStatement123(R)islargelyconsistentwithIFRS2,somedifferencesremain,asdescribedinaQ&AdocumentFASBissuedalongwiththenewStatement:

Q22.IstheStatementconvergentwithInternationalFinancialReportingStandards?

TheStatementislargelyconvergentwithInternationalFinancialReportingStandard(IFRS)2,SharebasedPayment.TheStatementandIFRS2havethepotentialtodifferinonlyafewareas.Themoresignificantareasarebrieflydescribedbelow.

IFRS2requirestheuseofthemodifiedgrantdatemethodforsharebasedpaymentarrangementswithnonemployees.Incontrast,Issue9618requiresthatgrantsofshareoptionsandotherequityinstrumentstononemployeesbemeasuredattheearlierof(1)thedateatwhichacommitmentforperformancebythecounterpartytoearntheequityinstrumentsisreachedor(2)thedateatwhichthecounterparty'sperformanceiscomplete.

IFRS2containsmorestringentcriteriafordeterminingwhetheranemployeesharepurchaseplaniscompensatoryornot.Asaresult,someemployeesharepurchaseplansforwhichIFRS2requiresrecognitionofcompensationcostwillnotbeconsideredtogiverisetocompensationcostundertheStatement.

IFRS2appliesthesamemeasurementrequirementstoemployeeshareoptionsregardlessofwhethertheissuerisapublicoranonpublicentity.TheStatementrequiresthatanonpublicentityaccountforitsoptionsandsimilarequityinstrumentsbasedontheirfairvalueunlessitisnotpracticabletoestimatetheexpectedvolatilityoftheentity'sshareprice.Inthatsituation,theentityisrequiredtomeasureitsequityshareoptionsandsimilarinstrumentsatavalueusingthehistoricalvolatilityofanappropriateindustrysectorindex.

IntaxjurisdictionssuchastheUnitedStates,wherethetimevalueofshareoptionsgenerallyisnotdeductiblefortaxpurposes,IFRS2requiresthatnodeferredtaxassetberecognizedforthecompensationcostrelatedtothetimevaluecomponentofthefairvalueofanaward.Adeferredtaxassetisrecognizedonlyifandwhentheshareoptionshaveintrinsicvaluethatcouldbedeductiblefortaxpurposes.Therefore,anentitythatgrantsanatthemoneyshareoptiontoan

http://www.iasplus.com/en/binary/usa/headsup/headsup11-10.pdfhttp://www.iasplus.com/en/binary/usa/0412fasbprfas123r.pdf



employeeinexchangeforserviceswillnotrecognizetaxeffectsuntilthatawardisinthemoney.Incontrast,theStatementrequiresrecognitionofadeferredtaxassetbasedonthegrantdatefairvalueoftheaward.Theeffectsofsubsequentdecreasesintheshareprice(orlackofanincrease)arenotreflectedinaccountingforthedeferredtaxassetuntiltherelatedcompensationcostisrecognizedfortaxpurposes.Theeffectsofsubsequentincreasesthatgenerateexcesstaxbenefitsarerecognizedwhentheyaffecttaxespayable.

TheStatementrequiresaportfolioapproachindeterminingexcesstaxbenefitsofequityawardsinpaidincapitalavailabletooffsetwriteoffsofdeferredtaxassets,whereasIFRS2requiresanindividualinstrumentapproach.Thus,somewriteoffsofdeferredtaxassetsthatwillberecognizedinpaidincapitalundertheStatementwillberecognizedindeterminingnetincomeunderIFRS2.

DifferencesbetweentheStatementandIFRS2maybefurtherreducedinthefuturewhentheIASBandFASBconsiderwhethertoundertakeadditionalworktofurtherconvergetheirrespectiveaccountingstandardsonsharebasedpayment.

March2005:SECStaffAccountingBulletin107

On29March2005,thestaffoftheUSSecuritiesandExchangeCommissionissuedStaffAccountingBulletin107dealingwithvaluationsandotheraccountingissuesforsharebasedpaymentarrangementsbypubliccompaniesunderFASBStatement123RShareBasedPayment.Forpubliccompanies,valuationsunderStatement123RaresimilartothoseunderIFRS2SharebasedPayment.SAB107providesguidancerelatedtosharebasedpaymenttransactionswithnonemployees,thetransitionfromnonpublictopublicentitystatus,valuationmethods(includingassumptionssuchasexpectedvolatilityandexpectedterm),theaccountingforcertainredeemablefinancialinstrumentsissuedundersharebasedpaymentarrangements,theclassificationofcompensationexpense,nonGAAPfinancialmeasures,firsttimeadoptionofStatement123Rinaninterimperiod,capitalisationofcompensationcostrelatedtosharebasedpaymentarrangements,accountingfortheincometaxeffectsofsharebasedpaymentarrangementsonadoptionofStatement123R,themodificationofemployeeshareoptionspriortoadoptionofStatement123R,anddisclosuresinManagement'sDiscussionandAnalysis(MD&A)subsequenttoadoptionofStatement123R.OneoftheinterpretationsinSAB107iswhethertherearedifferencesbetweenStatement123RandIFRS2thatwouldresultinareconcilingitem:

Question:DoesthestaffbelievetherearedifferencesinthemeasurementprovisionsforsharebasedpaymentarrangementswithemployeesunderInternationalAccountingStandardsBoardInternationalFinancialReportingStandard2,SharebasedPayment('IFRS2')andStatement123RthatwouldresultinareconcilingitemunderItem17or18ofForm20F?

InterpretiveResponse:ThestaffbelievesthatapplicationoftheguidanceprovidedbyIFRS2regardingthemeasurementofemployeeshareoptionswouldgenerallyresultinafairvaluemeasurementthatisconsistentwiththefairvalueobjectivestatedinStatement123R.Accordingly,thestaffbelievesthatapplicationofStatement123R'smeasurementguidancewouldnotgenerallyresultinareconcilingitemrequiredtobereportedunderItem17or18ofForm20FforaforeignprivateissuerthathascompliedwiththeprovisionsofIFRS2forsharebasedpaymenttransactionswithemployees.However,thestaffremindsforeignprivateissuersthattherearecertaindifferencesbetweentheguidanceinIFRS2andStatement123Rthatmayresultinreconcilingitems.[Footnotesomitted]

Clicktodownload:



SECPressRelease(PDF30k)

StaffAccountingBulletin107(PDF362k)

March2005:Bear,StearnsStudyonImpactofExpensingStockOptionsintheUnitedStates

IfUSpubliccompanieshadbeenrequiredtoexpenseemployeestockoptionsin2004,aswillberequiredunderFASBStatement123RShareBasedPaymentstartinginthirdquarter2005:

thereported2004posttaxnetincomefromcontinuingoperationsoftheS&P500companieswouldhavebeenreducedby5%,and

2004NASDAQ100posttaxnetincomefromcontinuingoperationswouldhavebeenreducedby22%.

ThosearekeyfindingsofastudyconductedbytheEquityResearchgroupatBear,Stearns&Co.Inc.Thepurposeofthestudyistohelpinvestorsgaugetheimpactthatexpensingemployeestockoptionswillhaveonthe2005earningsofUSpubliccompanies.TheBear,Stearnsanalysiswasbasedonthe2004stockoptiondisclosuresinthemostrecentlyfiled10KsofcompaniesthatwereS&P500andNASDAQ100constituentsasof31December2004.Exhibitstothestudypresenttheresultsbycompany,bysector,andbyindustry.VisitorstoIASPlusarelikelytofindthestudyofinterestbecausetherequirementsofFAS123RforpubliccompaniesareverysimilartothoseofIFRS2.WearegratefultoBear,StearnsforgivinguspermissiontopostthestudyonIASPlus.ThereportremainscopyrightBear,Stears&Co.Inc.,allrightsreserved.Clicktodownload2004EarningsImpactofStockOptionsontheS&P500&NASDAQ100Earnings(PDF486k).

November2005:Standard&Poor'sStudyonImpactofExpensingStockOptions

InNovember2005Standard&Poor'spublishedareportoftheimpactofexpensingstockoptionsontheS&P500companies.FAS123(R)requiresexpensingofstockoptions(mandatoryformostSECregistrantsin2006).IFRS2isnearlyidenticaltoFAS123(R).S&Pfound:

OptionexpensewillreduceS&P500earningsby4.2%.InformationTechnologyisaffectedthemost,reducingearningsby18%....P/Eratiosforallsectorswillbeincreased,butwillremainbelowhistoricalaverages.

TheimpactofoptionexpensingontheStandard&Poor's500willbenoticeable,butinanenvironmentofrecordearnings,highmarginsandhistoricallylowoperatingpricetoearningsratios,theindexisinitsbestpositionindecadestoabsorbtheadditionalexpense.

S&Ptakesissuewiththosecompaniesthattrytoemphasiseearningsbeforedeductingstockoptionexpenseandwiththoseanalystswhoignoreoptionexpensing.Thereportemphasisesthat:

Standard&Poor'swillincludeandreportoptionexpenseinallofitsearningsvalues,acrossallofitsbusinesslines.ThisincludesOperating,AsReportedandCore,andappliestoitsanalyticalworkintheS&PDomesticIndices,StockReports,aswellasitsforwardestimates.Itincludesallofitselectronicproducts....Theinvestmentcommunitybenefitswhenithasclearandconsistentinformationandanalyses.Aconsistentearningsmethodologythatbuildsonacceptedaccountingstandardsandproceduresisavitalcomponentofinvesting.Bysupportingthisdefinition,Standard&Poor'siscontributingtoamorereliableinvestmentenvironment.

Thecurrentdebateastothepresentationbycompaniesofearningsthatexcludeoptionexpense,generallybeingreferredtoasnonGAAPearnings,speakstotheheartofcorporategovernance.Addition

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ally,manyequityanalystsarebeingencouragedtobasetheirestimatesonnonGAAPearnings.WhilewedonotexpectarepeatoftheEBBS(EarningsBeforeBadStuff)proformaearningsof2001,theabilitytocompareissuesandsectorsdependsonanacceptedsetofaccountingrulesobservedbyall.Inordertomakeinformedinvestmentdecisions,theinvestingcommunityrequiresdatathatconformtoacceptedaccountingprocedures.Ofevenmoreconcernistheimpactthatsuchalternativepresentationandcalculationscouldhaveonthereducedleveloffaithandtrustinvestorsputintocompanyreporting.Thecorporategovernanceeventsofthelasttwoyearshaveerodedthetrustofmanyinvestors,trustthatwilltakeyearstoearnback.Inaneraofinstantaccessandcarefullyscriptedinvestorreleases,trustisnowamajorissue.

January2008:AmendmentofIFRS2toclarifyvestingconditionsandcancellations

On17January2008,theIASBpublishedfinalamendmentstoIFRS2SharebasedPaymenttoclarifytheterms'vestingconditions'and'cancellations'asfollows:

Vestingconditionsareserviceconditionsandperformanceconditionsonly.Otherfeaturesofasharebasedpaymentarenotvestingconditions.UnderIFRS2,featuresofasharebasedpaymentthatarenotvestingconditionsshouldbeincludedinthegrantdatefairvalueofthesharebasedpayment.Thefairvaluealsoincludesmarketrelatedvestingconditions.

Allcancellations,whetherbytheentityorbyotherparties,shouldreceivethesameaccountingtreatment.UnderIFRS2,acancellationofequityinstrumentsisaccountedforasanaccelerationofthevestingperiod.Thereforeanyamountunrecognisedthatwouldotherwisehavebeenchargedisrecognisedimmediately.Anypaymentsmadewiththecancellation(uptothefairvalueoftheequityinstruments)isaccountedforastherepurchaseofanequityinterest.Anypaymentinexcessofthefairvalueoftheequityinstrumentsgrantedisrecognisedasanexpense.

TheBoardhadproposedtheamendmentinanexposuredrafton2February2006.Theamendmentiseffectiveforannualperiodsbeginningonorafter1January2009,withearlierapplicationpermitted.

ClickforPressRelease(PDF47k).

DeloittehaspublishedaSpecialEditionofourIASPlusNewsletterexplainingtheamendmentstoIFRS2forvestingconditionsandcancellations(PDF126k).

June2009:IASBamendsIFRS2forgroupcashsettledsharebasedpaymenttransactions,withdrawsIFRICs8and11

On18June2009,theIASBissuedamendmentstoIFRS2SharebasedPaymentthatclarifytheaccountingforgroupcashsettledsharebasedpaymenttransactions.Theamendmentsclarifyhowanindividualsubsidiaryinagroupshouldaccountforsomesharebasedpaymentarrangementsinitsownfinancialstatements.Inthesearrangements,thesubsidiaryreceivesgoodsorservicesfromemployeesorsuppliersbutitsparentoranotherentityinthegroupmustpaythosesuppliers.Theamendmentsmakeclearthat:

Anentitythatreceivesgoodsorservicesinasharebasedpaymentarrangementmustaccountforthosegoodsorservicesnomatterwhichentityinthegroupsettlesthetransaction,andnomatterwhetherthetransactionissettledinsharesorcash.

InIFRS2a'group'hasthesamemeaningasinIAS27ConsolidatedandSeparateFinancialStatements,thatis,itincludesonlyaparentanditssubsidiaries.

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ContactusAboutLegalPrivacyFAQsMaterialonthiswebsiteis2015DeloitteGlobalServicesLimited,oramemberfirmofDeloitteToucheTohmatsuLimited,oroneoftheirrelatedentities.SeeLegalforadditionalcopyrightandotherlegalinformation.DeloittereferstooneormoreofDeloitteToucheTohmatsuLimited,aUKprivatecompanylimitedbyguarantee(DTTL),itsnetworkofmemberfirms,andtheirrelatedentities.DTTLandeachofitsmemberfirmsarelegallyseparateandindependententities.DTTL(alsoreferredtoasDeloitteGlobal)doesnotprovideservicestoclients.Pleaseseewww.deloitte.com/aboutforamoredetaileddescriptionofDTTLanditsmemberfirms.

7

TheamendmentstoIFRS2alsoincorporateguidancepreviouslyincludedinIFRIC8ScopeofIFRS2andIFRIC11IFRS2GroupandTreasuryShareTransactions.Asaresult,theIASBhaswithdrawnIFRIC8andIFRIC11.Theamendmentsareeffectiveforannualperiodsbeginningonorafter1January2010andmustbeappliedretrospectively.Earlierapplicationispermitted.ClickforIASBpressrelease(PDF103k).

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1/13/2015 IFRS3BusinessCombinations


IFRS3BusinessCombinations

Overview

IFRS3BusinessCombinationsoutlinestheaccountingwhenanacquirerobtainscontrolofabusiness(e.g.anacquisitionormerger).Suchbusinesscombinationsareaccountedforusingthe'acquisitionmethod',whichgenerallyrequiresassetsacquiredandliabilitiesassumedtobemeasuredattheirfairvaluesattheacquisitiondate.

ArevisedversionofIFRS3wasissuedinJanuary2008andappliestobusinesscombinationsoccurringinanentity'sfirstannualperiodbeginningonorafter1July2009.

HistoryofIFRS3Date Development CommentsJuly2001 ProjectaddedtoIASBagenda

(carriedoverfromtheoldIASC)Historyoftheproject

5December2002 ExposureDraftED3BusinessCombinationsandrelatedexposuredraftsproposingamendmentstoIAS36andIAS38published

Commentdeadline4April2003

31March2004 IFRS3BusinessCombinations(2004)andrelatedamendedversionsofIAS36andIAS38issued(IFRS3supersedesIAS22)

Effectiveforbusinesscombinationsforwhichtheagreementdateisonorafter31March2004

29April2004 ExposureDraftCombinationsbyContractAloneorInvolvingMutualEntitiespublished(Theseproposalswerenotfinalised,butinsteadconsideredaspartoftheJune2005exposuredraft)

Commentdeadline31July2004

30June2005 ExposureDraftProposedAmendmentstoIFRS3published

Commentdeadline28October2005

10January2008 IFRS3BusinessCombinations(2008)issued Appliestobusinesscombinationsforwhichtheacquisitiondateisonorafterthebeginningofthefirstannualreportingperiodbeginningonorafter1July2009

6May2010 AmendedbyAnnualImprovementstoIFRSs2010(measurementofnoncontrollinginterests,replacedsharebasedpaymentawards,transitionalarrangementsforcontingentconsideration)


12December2013AmendedbyAnnualImprovementstoIFRSs20102012Cycle(contingentconsideration)

Applicableforbusinesscombinationsforwhichtheacquisitiondateisonorafter1July2014

QuickArticleLinks

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12December2013AmendedbyAnnualImprovementstoIFRSs20112013Cycle(scopeexceptionforjointventures)


RelatedInterpretationsNone

AmendmentsunderconsiderationbytheIASBCommoncontroltransactions

PostimplementationreviewIFRS3

SummaryofIFRS3Background

IFRS3(2008)seekstoenhancetherelevance,reliabilityandcomparabilityofinformationprovidedaboutbusinesscombinations(e.g.acquisitionsandmergers)andtheireffects.Itsetsouttheprinciplesontherecognitionandmeasurementofacquiredassetsandliabilities,thedeterminationofgoodwillandthenecessarydisclosures.

IFRS3(2008)resultedfromajointprojectwiththeUSFinancialAccountingStandardsBoard(FASB)andreplacedIFRS3(2004).FASBissuedasimilarstandardinDecember2007(SFAS141(R)).TherevisionsresultinahighdegreeofconvergencebetweenIFRSsandUSGAAPintheaccountingforbusinesscombinations,althoughsomepotentiallysignificantdifferencesremain.

Keydefinitions

[IFRS3,AppendixA]

businesscombinationAtransactionorothereventinwhichanacquirerobtainscontrolofoneormorebusinesses.Transactionssometimesreferredtoas'truemergers'or'mergersofequals'arealsobusinesscombinationsasthattermisusedin[IFRS3]businessAnintegratedsetofactivitiesandassetsthatiscapableofbeingconductedandmanagedforthepurposeofprovidingareturnintheformofdividends,lowercostsorothereconomicbenefitsdirectlytoinvestorsorotherowners,membersorparticipantsacquisitiondateThedateonwhichtheacquirerobtainscontroloftheacquireeacquirerTheentitythatobtainscontroloftheacquireeacquireeThebusinessorbusinessesthattheacquirerobtainscontrolofinabusinesscombinationScope

IFRS3mustbeappliedwhenaccountingforbusinesscombinations,butdoesnotapplyto:

Theformationofajointventure*[IFRS3.2(a)]

Theacquisitionofanassetorgroupofassetsthatisnotabusiness,althoughgeneralguidanceisprovidedonhowsuchtransactionsshouldbeaccountedfor[IFRS3.2(b)]

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Combinationsofentitiesorbusinessesundercommoncontrol(theIASBhasaseparateagendaprojectoncommoncontroltransactions)[IFRS3.2(c)]

AcquisitionsbyaninvestmententityofasubsidiarythatisrequiredtobemeasuredatfairvaluethroughprofitorlossunderIFRS10ConsolidatedFinancialStatements.[IFRS3.2A]

*AnnualImprovementstoIFRSs20112013Cycle,effectiveforannualperiodsbeginningonorafter1July2014,amendsthisscopeexclusiontoclarifythatisappliestotheaccountingfortheformationofajointarrangementinthefinancialstatementsofthejointarrangementitself.

Determiningwhetheratransactionisabusinesscombination

IFRS3providesadditionalguidanceondeterminingwhetheratransactionmeetsthedefinitionofabusinesscombination,andsoaccountedforinaccordancewithitsrequirements.Thisguidanceincludes:

Businesscombinationscanoccurinvariousways,suchasbytransferringcash,incurringliabilities,issuingequityinstruments(oranycombinationthereof),orbynotissuingconsiderationatall(i.e.bycontractalone)[IFRS3.B5]

Businesscombinationscanbestructuredinvariouswaystosatisfylegal,taxationorotherobjectives,includingoneentitybecomingasubsidiaryofanother,thetransferofnetassetsfromoneentitytoanotherortoanewentity[IFRS3.B6]

Thebusinesscombinationmustinvolvetheacquisitionofabusiness,whichgenerallyhasthreeelements:[IFRS3.B7]

Inputsaneconomicresource(e.g.noncurrentassets,intellectualproperty)thatcreatesoutputswhenoneormoreprocessesareappliedtoit

Processasystem,standard,protocol,conventionorrulethatwhenappliedtoaninputorinputs,createsoutputs(e.g.strategicmanagement,operationalprocesses,resourcemanagement)

Outputtheresultofinputsandprocessesappliedtothoseinputs.

MethodofaccountingforbusinesscombinationsAcquisitionmethod

Theacquisitionmethod(calledthe'purchasemethod'inthe2004versionofIFRS3)isusedforallbusinesscombinations.[IFRS3.4]

Stepsinapplyingtheacquisitionmethodare:[IFRS3.5]

1. Identificationofthe'acquirer'

2. Determinationofthe'acquisitiondate'

3. Recognitionandmeasurementoftheidentifiableassetsacquired,theliabilitiesassumedandanynoncontrollinginterest(NCI,formerlycalledminorityinterest)intheacquiree

4. Recognitionandmeasurementofgoodwilloragainfromabargainpurchase

Identifyinganacquirer

TheguidanceinIFRS10ConsolidatedFinancialStatementsisusedtoidentifyanacquirerinabusinesscombination,i.e.theentitythatobtains'control'oftheacquiree.[IFRS3.7]

IftheguidanceinIFRS10doesnotclearlyindicatewhichofthecombiningentitiesisanacquirer,IFRS3providesadditionalguidancewhichisthenconsidered:

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Theacquirerisusuallytheentitythattransferscashorotherassetswherethebusinesscombinationiseffectedinthismanner[IFRS3.B14]

Theacquirerisusually,butnotalways,theentityissuingequityinterestswherethetransactioniseffectedinthismanner,howevertheentityalsoconsidersotherpertinentfactsandcircumstancesincluding:[IFRS3.B15]

relativevotingrightsinthecombinedentityafterthebusinesscombination

theexistenceofanylargeminorityinterestifnootherownerorgroupofownershasasignificantvotinginterest

thecompositionofthegoverningbodyandseniormanagementofthecombinedentity

thetermsonwhichequityinterestsareexchanged

Theacquirerisusuallytheentitywiththelargestrelativesize(assets,revenuesorprofit)[IFRS3.B16]

Forbusinesscombinationsinvolvingmultipleentities,considerationisgiventotheentityinitiatingthecombination,andtherelativesizesofthecombiningentities.[IFRS3.B17]

Acquisitiondate

Anacquirerconsidersallpertinentfactsandcircumstanceswhendeterminingtheacquisitiondate,i.e.thedateonwhichitobtainscontroloftheacquiree.Theacquisitiondatemaybeadatethatisearlierorlaterthantheclosingdate.[IFRS3.89]

IFRS3doesnotprovidedetailedguidanceonthedeterminationoftheacquisitiondateandthedateidentifiedshouldreflectallrelevantfactsandcircumstances.Considerationsmightinclude,amongothers,thedateapublicofferbecomesunconditional(withacontrollinginterestacquired),whentheacquirercaneffectchangeintheboardofdirectorsoftheacquiree,thedateofacceptanceofanunconditionaloffer,whentheacquirerstartsdirectingtheacquiree'soperatingandfinancingpolicies,orthedatecompetitionorotherauthoritiesprovidenecessarilyclearances.

Acquiredassetsandliabilities

IFRS3establishesthefollowingprinciplesinrelationtotherecognitionandmeasurementofitemsarisinginabusinesscombination:

Recognitionprinciple.Identifiableassetsacquired,liabilitiesassumed,andnoncontrollinginterestsintheacquiree,arerecognisedseparatelyfromgoodwill[IFRS3.10]

Measurementprinciple.Allassetsacquiredandliabilitiesassumedinabusinesscombinationaremeasuredatacquisitiondatefairvalue.[IFRS3.18]

Exceptionstotherecognitionandmeasurementprinciples

Thefollowingexceptionstotheaboveprinciplesapply:

ContingentliabilitiestherequirementsofIAS37Provisions,ContingentLiabilitiesandContingentAssetsdonotapplytotherecognitionofcontingentliabilitiesarisinginabusinesscombination[IFRS3.2223]

IncometaxestherecognitionandmeasurementofincometaxesisinaccordancewithIAS12IncomeTaxes[IFRS3.2425]

Employeebenefitsassetsandliabilitiesarisingfromanacquiree'semployeebenefitsarrange

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mentsarerecognisedandmeasuredinaccordancewithIAS19EmployeeBenefits(2011)[IFRS2.26]

Indemnificationassetsanacquirerrecognisesindemnificationassetsatthesametimeandonthesamebasisastheindemnifieditem[IFRS3.2728]

Reacquiredrightsthemeasurementofreacquiredrightsisbyreferencetotheremainingcontractualtermwithoutrenewals[IFRS3.29]

SharebasedpaymenttransactionsthesearemeasuredbyreferencetothemethodinIFRS2SharebasedPayment

AssetsheldforsaleIFRS5NoncurrentAssetsHeldforSaleandDiscontinuedOperationsisappliedinmeasuringacquirednoncurrentassetsanddisposalgroupsclassifiedasheldforsaleattheacquisitiondate.

Inapplyingtheprinciples,anacquirerclassifiesanddesignatesassetsacquiredandliabilitiesassumedonthebasisofthecontractualterms,economicconditions,operatingandaccountingpoliciesandotherpertinentconditionsexistingattheacquisitiondate.Forexample,thismightincludetheidentificationofderivativefinancialinstrumentsashedginginstruments,ortheseparationofembeddedderivativesfromhostcontracts.[IFRS3.15]However,exceptionsaremadeforleaseclassification(betweenoperatingandfinanceleases)andtheclassificationofcontractsasinsurancecontracts,whichareclassifiedonthebasisofconditionsinplaceattheinceptionofthecontract.[IFRS3.17]

Acquiredintangibleassetsmustberecognisedandmeasuredatfairvalueinaccordancewiththeprinciplesifitisseparableorarisesfromothercontractualrights,irrespectiveofwhethertheacquireehadrecognisedtheassetpriortothebusinesscombinationoccurring.Thisisbecausethereisalwayssufficientinformationtoreliablymeasurethefairvalueoftheseassets.[IAS38.3337]Thereisno'reliablemeasurement'exceptionforsuchassets,aswaspresentunderIFRS3(2004).

Goodwill

Goodwillismeasuredasthedifferencebetween:

theaggregateof(i)thevalueoftheconsiderationtransferred(generallyatfairvalue),(ii)theamountofanynoncontrollinginterest(NCI,seebelow),and(iii)inabusinesscombinationachievedinstages(seebelow),theacquisitiondatefairvalueoftheacquirer'spreviouslyheldequityinterestintheacquiree,and

thenetoftheacquisitiondateamountsoftheidentifiableassetsacquiredandtheliabilitiesassumed(measuredinaccordancewithIFRS3).[IFRS3.32]

Thiscanbewritteninsimplifiedequationformasfollows:

Goodwill = Considerationtransferred

+ Amountofnoncontrollinginterests

+ Fairvalueofpreviousequity

interests

Netassetsrecognised

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Ifthedifferenceaboveisnegative,theresultinggainisabargainpurchaseinprofitorloss,whichmayariseincircumstancessuchasaforcedselleractingundercompulsion.[IFRS3.3435]However,beforeanybargainpurchasegainisrecognisedinprofitorloss,theacquirerisrequiredtoundertakeareviewtoensuretheidentificationofassetsandliabilitiesiscomplete,andthatmeasurementsappropriatelyreflectconsiderationofallavailableinformation.[IFRS3.36]

Choiceinthemeasurementofnoncontrollinginterests(NCI)

IFRS3allowsanaccountingpolicychoice,availableonatransactionbytransactionbasis,tomeasurenoncontrollinginterests(NCI)eitherat:[IFRS3.19]

fairvalue(sometimescalledthefullgoodwillmethod),or

theNCI'sproportionateshareofnetassetsoftheacquiree.

Thechoiceinaccountingpolicyappliesonlytopresentownershipinterestsintheacquireethatentitleholderstoaproportionateshareoftheentity'snetassetsintheeventofaliquidation(e.g.outsideholdingsofanacquiree'sordinaryshares).OthercomponentsofnoncontrollinginterestsatmustbemeasuredatacquisitiondatefairvaluesorinaccordancewithotherapplicableIFRSs(e.g.sharebasedpaymenttransactionsaccountedforunderIFRS2SharebasedPayment).[IFRS3.19]

Example

Ppays800toacquirean80%interestintheordinarysharesofS.Theaggregatedfairvalueof100%ofS'sidentifiableassetsandliabilities(determinedinaccordancewiththerequirementsofIFRS3)is600,andthefairvalueofthenoncontrollinginterest(theremaining20%holdingofordinaryshares)is185.

Themeasurementofthenoncontrollinginterest,anditsresultantimpactsonthedeterminationofgoodwill,undereachoptionisillustratedbelow:

NCIbasedonfairvalue

NCIbasedonnetassets

Considerationtransferred 800 800Noncontrollinginterest 185 120

985 920Netassets (600) (600)Goodwill 385 320

(1)Thefairvalueofthe20%noncontrollinginterestinSwillnotnecessarilybeproportionatetothepricepaidbyPforits80%interest,primarilyduetoanycontrolpremiumordiscount[IFRS3.B45]

(2)Calculatedas20%ofthefairvalueofthenetassetsof600.

Businesscombinationachievedinstages(stepacquisitions)

Priortocontrolbeingobtained,anacquireraccountsforitsinvestmentintheequityinterestsofanacquireeinaccordancewiththenatureoftheinvestmentbyapplyingtherelevantstandard,e.g.IAS28InvestmentsinAssociatesandJointVentures(2011),IFRS11JointArrangements,IAS39FinancialIn

(1) (2)

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struments:RecognitionandMeasurementorIFRS9FinancialInstruments.Aspartofaccountingforthebusinesscombination,theacquirerremeasuresanypreviouslyheldinterestatfairvalueandtakesthisamountintoaccountinthedeterminationofgoodwillasnotedabove[IFRS3.32]Anyresultantgainorlossisrecognisedinprofitorlossorothercomprehensiveincomeasappropriate.[IFRS3.42]

Theaccountingtreatmentofanentity'sprecombinationinterestinanacquireeisconsistentwiththeviewthattheobtainingofcontrolisasignificanteconomiceventthattriggersaremeasurement.Consistentwiththisview,alloftheassetsandliabilitiesoftheacquireearefullyremeasuredinaccordancewiththerequirementsofIFRS3(generallyatfairvalue).Accordingly,thedeterminationofgoodwilloccursonlyattheacquisitiondate.ThisisdifferenttotheaccountingforstepacquisitionsunderIFRS3(2004).

Measurementperiod

Iftheinitialaccountingforabusinesscombinationcanbedeterminedonlyprovisionallybytheendofthefirstreportingperiod,thebusinesscombinationisaccountedforusingprovisionalamounts.Adjustmentstoprovisionalamounts,andtherecognitionofnewlyidentifiedassetandliabilities,mustbemadewithinthe'measurementperiod'wheretheyreflectnewinformationobtainedaboutfactsandcircumstancesthatwereinexistenceattheacquisitiondate.[IFRS3.45]ThemeasurementperiodcannotexceedoneyearfromtheacquisitiondateandnoadjustmentsarepermittedafteroneyearexcepttocorrectanerrorinaccordancewithIAS8.[IFRS3.50]

RelatedtransactionsandsubsequentaccountingGeneralprinciples

Ingeneral:

transactionsthatarenotpartofwhattheacquirerandacquiree(oritsformerowners)exchangedinthebusinesscombinationareidentifiedandaccountedforseparatelyfrombusinesscombination

therecognitionandmeasurementofassetsandliabilitiesarisinginabusinesscombinationaftertheinitialaccountingforthebusinesscombinationisdealtwithunderotherrelevantstandards,e.g.acquiredinventoryissubsequentlyaccountedunderIAS2Inventories.[IFRS3.54]

Whendeterminingwhetheraparticularitemispartoftheexchangefortheacquireeorwhetheritisseparatefromthebusinesscombination,anacquirerconsidersthereasonforthetransaction,whoinitiatedthetransactionandthetimingofthetransaction.[IFRS3.B50]

Contingentconsideration

Contingentconsiderationmustbemeasuredatfairvalueatthetimeofthebusinesscombinationandistakenintoaccountinthedeterminationofgoodwill.Iftheamountofcontingentconsiderationchangesasaresultofapostacquisitionevent(suchasmeetinganearningstarget),accountingforthechangeinconsiderationdependsonwhethertheadditionalconsiderationisclassifiedasanequityinstrumentoranassetorliability:[IFRS3.58]

Ifthecontingentconsiderationisclassifiedasanequityinstrument,theoriginalamountisnotremeasured

Iftheadditionalconsiderationisclassifiedasanassetorliabilitythatisafinancialinstrument,thecontingentconsiderationismeasuredatfairvalueandgainsandlossesarerecognisedineither

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profitorlossorothercomprehensiveincomeinaccordancewithIFRS9FinancialInstrumentsorIAS39FinancialInstruments:RecognitionandMeasurement

IftheadditionalconsiderationisnotwithinthescopeofIFRS9(orIAS39),itisaccountedforinaccordancewithIAS37Provisions,ContingentLiabilitiesandContingentAssetsorotherIFRSsasappropriate.

Note:AnnualImprovementstoIFRSs20102012Cyclechangestheserequirementsforbusinesscombinationsforwhichtheacquisitiondateisonorafter1July2014.Undertheamendedrequirements,contingentconsiderationthatisclassifiedasanassetorliabilityismeasuredatfairvalueateachreportingdateandchangesinfairvaluearerecognisedinprofitorloss,bothforcontingentconsiderationthatiswithinthescopeofIFRS9/IAS39orotherwise.

Whereachangeinthefairvalueofcontingentconsiderationistheresultofadditionalinformationaboutfactsandcircumstancesthatexistedattheacquisitiondate,thesechangesareaccountedforasmeasurementperiodadjustmentsiftheyariseduringthemeasurementperiod(seeabove).[IFRS3.58]

Acquisitioncosts

CostsofissuingdebtorequityinstrumentsareaccountedforunderIAS32FinancialInstruments:PresentationandIAS39FinancialInstruments:RecognitionandMeasurement/IFRS9FinancialInstruments.Allothercostsassociatedwithanacquisitionmustbeexpensed,includingreimbursementstotheacquireeforbearingsomeoftheacquisitioncosts.Examplesofcoststobeexpensedincludefinder'sfeesadvisory,legal,accounting,valuationandotherprofessionalorconsultingfeesandgeneraladministrativecosts,includingthecostsofmaintaininganinternalacquisitionsdepartment.[IFRS3.53]

Preexistingrelationshipsandreacquiredrights

Iftheacquirerandacquireewerepartiestoapreexistingrelationship(forinstance,theacquirerhadgrantedtheacquireearighttouseitsintellectualproperty),thismustmustbeaccountedforseparatelyfromthebusinesscombination.Inmostcases,thiswillleadtotherecognitionofagainorlossfortheamountoftheconsiderationtransferredtothevendorwhicheffectivelyrepresentsa'settlement'ofthepreexistingrelationship.Theamountofthegainorlossismeasuredasfollows:

forpreexistingnoncontractualrelationships(forexample,alawsuit):byreferencetofairvalue

forpreexistingcontractualrelationships:atthelesserof(a)thefavourable/unfavourablecontractpositionand(b)anystatedsettlementprovisionsinthecontractavailabletothecounterpartytowhomthecontractisunfavourable.[IFRS3.B5153]

However,wherethetransactioneffectivelyrepresentsareacquiredright,anintangibleassetisrecognisedandmeasuredonthebasisoftheremainingcontractualtermoftherelatedcontractexcludinganyrenewals.Theassetisthensubsequentlyamortisedovertheremainingcontractualterm,againexcludinganyrenewals.[IFRS3.55]

Contingentliabilities

Untilacontingentliabilityissettled,cancelledorexpired,acontingentliabilitythatwasrecognisedintheinitialaccountingforabusinesscombinationismeasuredatthehigheroftheamounttheliabilitywouldberecognisedunderIAS37Provisions,ContingentLiabilitiesandContingentAssets,andtheamountlessaccumulatedamortisationunderIAS18Revenue.[IFRS3.56]

Contingentpaymentstoemployeesandshareholders

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Aspartofabusinesscombination,anacquirermayenterintoarrangementswithsellingshareholdersoremployees.Indeterminingwhethersucharrangementsarepartofthebusinesscombinationoraccountedforseparately,theacquirerconsidersanumberoffactors,includingwhetherthearrangementrequirescontinuingemployment(andifso,itsterm),thelevelorremunerationcomparedtootheremployees,whetherpaymentstoshareholderemployeesareincrementaltononemployeeshareholders,therelativenumberofsharesowns,linkagestovaluationoftheacquiree,howtheconsiderationiscalculated,andotheragreementsandissues.[IFRS3.B55]

Wheresharebasedpaymentarrangementsoftheacquireeexistandarereplaced,thevalueofsuchawardsmustbeapportionedbetweenprecombinationandpostcombinationserviceandaccountedforaccordingly.[IFRS3.B56B62B]

Indemnificationassets

Indemnificationassetsrecognisedattheacquisitiondate(undertheexceptionstothegeneralrecognitionandmeasurementprinciplesnotedabove)aresubsequentlymeasuredonthesamebasisoftheindemnifiedliabilityorasset,subjecttocontractualimpactsandcollectibility.Indemnificationassetsareonlyderecognisedwhencollected,soldorwhenrightstoitarelost.[IFRS3.57]

Otherissues

Inaddition,IFRS3providesguidanceonsomespecificaspectsofbusinesscombinationsincluding:

businesscombinationsachievedwithoutthetransferofconsideration,e.g.'duallisted'and'stapled'arrangements[IFRS3.4344]

reverseacquisitions[IFRS3.B19]

identifyingintangibleassetsacquired[IFRS3.B3134]

DisclosureDisclosureofinformationaboutcurrentbusinesscombinations

Anacquirerisrequiredtodiscloseinformationthatenablesusersofitsfinancialstatementstoevaluatethenatureandfinancialeffectofabusinesscombinationthatoccurseitherduringthecurrentreportingperiodoraftertheendoftheperiodbutbeforethefinancialstatementsareauthorisedforissue.[IFRS3.59]

Amongthedisclosuresrequiredtomeettheforegoingobjectivearethefollowing:[IFRS3.B64B66]

nameandadescriptionoftheacquiree

acquisitiondate

percentageofvotingequityinterestsacquired

primaryreasonsforthebusinesscombinationandadescriptionofhowtheacquirerobtainedcontroloftheacquiree

descriptionofthefactorsthatmakeupthegoodwillrecognised

qualitativedescriptionofthefactorsthatmakeupthegoodwillrecognised,suchasexpectedsynergiesfromcombiningoperations,intangibleassetsthatdonotqualifyforseparaterecognition

acquisitiondatefairvalueofthetotalconsiderationtransferredandtheacquisitiondatefairvalueofeachmajorclassofconsideration



detailsofcontingentconsiderationarrangementsandindemnificationassets

detailsofacquiredreceivables

theamountsrecognisedasoftheacquisitiondateforeachmajorclassofassetsacquiredandliabilitiesassumed

detailsofcontingentliabilitiesrecognised

totalamountofgoodwillthatisexpectedtobedeductiblefortaxpurposes

detailsaboutanytransactionsthatarerecognisedseparatelyfromtheacquisitionofassetsandassumptionofliabilitiesinthebusinesscombination

informationaboutabargainpurchase

informationaboutthemeasurementofnoncontrollinginterests

detailsaboutabusinesscombinationachievedinstages

informationabouttheacquiree'srevenueandprofitorloss

informationaboutabusinesscombinationwhoseacquisitiondateisaftertheendofthereportingperiodbutbeforethefinancialstatementsareauthorisedforissue

Disclosureofinformationaboutadjustmentsofpastbusinesscombinations

Anacquirerisrequiredtodiscloseinformationthatenablesusersofitsfinancialstatementstoevaluatethefinancialeffectsofadjustmentsrecognisedinthecurrentreportingperiodthatrelatetobusinesscombinationsthatoccurredintheperiodorpreviousreportingperiods.[IFRS3.61]

Amongthedisclosuresrequiredtomeettheforegoingobjectivearethefollowing:[IFRS3.B67]

detailswhentheinitialaccountingforabusinesscombinationisincompleteforparticularassets,liabilities,noncontrollinginterestsoritemsofconsiderat

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