AASB 3 Business Combinations

AASB 3 Business Combinations

AASB 3 Business Combinations set outs the financial reporting requirements for an entity undertaking a business combination, where:

• a business combination is defined as a transaction or other event in which an acquirer obtains control of one or more businesses; and,
• a business is defined as an integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing goods or services to customers, generating investment income (such as dividends of interest) or generating other inform from ordinary.

Acquisition method

Per AASB 3, all business combinations are to be accounted for by applying the Acquisition Method. Application of the Acquisition Method involves:

• identifying the acquirer;
• determining the acquisition date;
• recognising and measuring the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree; and,
• recognising and measuring goodwill or a gain from a bargain purchase allocating.

Recognition and measurement

Per AASB 3, the identifiable assets acquired and the liabilities assumed are recognised at Fair Value at the acquisition date.

To qualify for recognition as part of applying the Acquisition Method, the identifiable assets acquired and liabilities assumed must meet the definitions of assets and liabilities per the Framework for the Preparation and Presentation of Financial Statements.

Consideration

Per AASB 3, consideration is measured at Fair Value and is calculated as the sum of the acquisition-date Fair Values of the assets transferred by the acquirer and the liabilities incurred by the acquirer

Further, the acquisition-date Fair Value of contingent consideration is recognised as part of the consideration transferred in exchange for the acquiree.

Reporting

Lotus Amity provides Purchase Price Allocation reports that meet the AASB 3 reporting requirements. This includes identifying and valuing the tangible and intangible assets acquired and the liabilities assumed.

AASB 138 Intangible Assets