International Financial Reporting Standards (IFRS)

IFRS for Small and Medium-sized Entities (SMEs)
Section 19: Business Combinations and Goodwill

1. Business combination
--> (A) obtains control of (B)
(A) acquirer
(B) acquiree

2. Purchase method is applied.

3. Steps of purchase method
(1) acquirer identification
(2) measurement of (C)
--> (C) the cost of business combinations
(3) allocation of (C) to assets, liabilities and contingent liabilities

4. Acquirer obtains control

5. Cost of business combinations
--> sum of (D) and (E)
(D) fair value of considerations provided by acquirer
(E) other costs attributable to business combinations

6. SME 19: Business Combinations and Goodwill

If (F) > (G) --> paid more for goodwill
Goodwill = (F) - (G)
(F) Considerations provided to acquire net assets
(G) Fair value of net assets (assets - liabilities) acquired

If (F) < (G) --> negative goodwill
First, reassess the measurement of assets and liabilities
Second, remaining portion after reassessment
--> is recognised in profit or loss

7. SME 19: Business Combinations and Goodwill

(1) Goodwill is amortised over useful life
(2) If useful life cannot be estimated --> amortise over 10 years
(3) Goodwill is reviewed for impairment
(4) Goodwill = cost - (H) - (I)
--> (H) accumulated depreciation
--> (I) accumulated impairment losses