assalamualaikum friends welcome to lecture 27 of SBR ifrs3 business combination from your sbr's point of view this standard is a standard which is definitely going to come for your exam why because this question comes as a first question in your SBR which is for 30 marks which is the group accounting question so ifrs3 is one of the major standard in your group accounting question and this standard is definitely going to come so you cannot skip this okay the standard is going to be a long standard because we have lots of questions and this one okay so let's go through we are going to go through the definition of a business and accusation accounting okay first what is a business when an entity one entity acquires another entity okay that means one entity will now have a control over another entity that constitutes a business okay if it's a business that you are acquiring it then you can use then it is known as consolidation if it's a business right you can use you can use the accusation method but if you have not acquired a business and instead you have acquired assets then it should be accounted as purchase of an asset not a business then it's not a consolidation you cannot use the accusation method okay it's the purchase of an asset and depending on the type of asset you will delete according to the various standard for example if it's a tangible asset it is is 16. property planning equipment if it's an intangible asset is 38 right financial asset then IFR is nine depending on the type of asset but if it's a business if what you have acquired if you have got if you have gained control over another entity and it's a business then ifrs3 applies right now you need to understand what is a business and what is not a business because it's because it's very easy to get confused in the exam trust me you have to be very very careful on the definition of a business a business is not simply some collection of resources please understand this when you are acquiring a business you are also acquiring the process it should have a process should have an input process and an output process means it is able to convert the input into output that is known as a process that means a business must have these three things input process and output if it does not have it then it's not a business it's an asset no for you to identify whether it's a business or an asset there is a test which is known as concentration test you have to carry out this test okay but in this test you check this test is to check that the assets the the what you have acquired is not a business it's not our business you are not testing for a business you are checking to see whether it's not a business okay and the concentration the concentration test is met if substantially all of the family of the total asset that you have acquired is concentrated in one single asset or a group of similar assets foreign because this test is to check that it's not a business concentration test is management it's not a business it's assets if a concentration test is not met that means it's a business please understand this it's a little confusing I know in the beginning but just memorize it not a business not a business not a business that means concentration test is met it's not a business concentration test is not met it's a business is the opposite so now we'll do three questions on this to identify whether it's a business or not before we move on to accusation accounting that is our major area for your group accounting test your understanding for taco okay apply the optional concentration test in IFRS S3 to determine whether Fujita is not a business okay is not a business a non-listed company Fujita owns 20 houses which are these to tenants houses are located in the same area the fair value of the Constitution paid for the shares in Fijit is equal to the total travel of the 20 houses okay now tell me whether this is a business or an asset you need to apply the facts in the previous slide we told that if the substantial amount of the fair value is concentrated in a single asset or a group of similar assets is not a business so you have to understand houses okay the the subject here is houses okay so houses are a group of similar assets there are not just one house it's 20 houses okay so there's 20 houses that means their group of similar assets they are not one asset one is a house one is a car one is a land is not like that they could be grouped together because they are similar assets right 20 houses and look at the fair value you need to look at the fair value but that is concentrated in one particular asset or not so here the fair value of the total asset acquired is concentrated in a group of similar assets because they told concentration paid for the shares are equal to the total farewell of the 20 houses so they are concentrated in the 20 houses the fair value that means they have purchased a asset that means they have purchased this 20 houses it's not a business so this is the conclusion that we have reached it's not a business okay it has met the test concentration test has been met it's not a business they have just purchased the 20 houses now will we move on moving on to test understanding five and six and test your understanding six this two question are very similar to each other except with some changes in information otherwise the question for both is discuss whether the company constitutes a business or not so let us first go through test understanding five here Shepherd is owning 100 of shares in pi which is a non-listed company Pi owns 10 houses okay which are least to residential tenants and two multi-story office blocks which are these two commercial tenant Pi has no employees with all Property Management has to be performed by other employees from within the shepherd group other employees they don't have their own employees there are contracts in place for third parties to provide cleaning and service security service to the commercial tenant cleaning and service the total fair value of the house is similar to the total family of the office block now they want to apply the concentration test so looking at the facts from the case study tell me whether the consultation test is met or not see when this type of question comes in your exam attack one by one one piece of information at a time if you look at the whole picture you'll get confused it talks about leases it talks about the office blocks it talks about residential tenant commercial tenant cleaning and service cleaning and security then the fair value you'll get confused okay first understand that there are two types of property one is for residential Talent the other one is for commercial tenant their least okay when you see their nature even though assets are all buildings okay the one which you are given to residential tenant is also building the one which you are given to the commercial tenant is also a building but the way they function is different the risk that they face are different risk foreign operating residential property is different to operating office blocks the commercial properties right so this assets are dissimilar because risk different means what for assets to be similar the risk has to be same understand this if risk are different assets are disabled unlike in the previous one previous question it was 20 Bill houses all the 20 houses they are same same risk but here assets are dissimilar you need to identify this point first next what's the next point so this means the fair value why are we saying dissimilar always start with where the assets are similar or not number one asset similarity this is optional test I'm talking about okay optional concentration test if assets are similar then comes second thing you need to understand is the fair value whether they are concentrated in one asset or not so that's what we are going to touch talk about the fair value because they are dissimilar means fair value of the assets are not concentrated in a single group of assets right I'm not writing the whole answer answers are there behind your textbook take your own time read it I'm just explaining the main points of the answers okay you can make up your own answer so the farewell of the assets are not concentrated in one asset or or in a single group of assets okay now what does it say whether it's a business or not looks like it's a business right looks like it's a business because they are not concentrated in one single asset assets are dissimilar looks like it's a business but you have to do more detail analysis here more detail assessment are needed what is that once the optional test is there you get an answer go to next you have to do on detail analysis you have to look for what the three things as I say to check whether it's see from the optional test what is the conclusion that you're coming to tell me that first the conclusion is okay this is the conclusion it's a business right because farewell is not concentrated in single acid and acids are dissimilar it's a business but you have to do more detail assessment to still say that it's a business or not what is it the three test input process output this is the second thing you have to see whether you have acquired the input process and the output if you have for quite this three then it's a business otherwise it's an asset even though it fails the optional test it will be an asset okay so here you need to see output okay if you are confused input percent output C which one is the easiest for you to identify the easiest is always the output because you can see that it's the physical outcome that you can see so look for the output in the answer here as a studies output y because they are leases you have leased so you can get the rental income that is an output rental income is your output output is the rental income because you have leased so you have acquired the output next what about the process and the input if you are not able to identify input it's okay at least whatever you could from the case study you have to get sometimes it's not possible for you to get all the three from the case study you have to see the information given to you if the information is not enough for you to identify input just leave it okay come to the process process is very important so process here you have not acquired the substantity process why two things what are the two things no organized Workforce no employee you see you are giving it to some other employee but you don't have there are no employers have highlighted somewhere Buy has no employees so you don't have an organized Workforce because if you have the workforce that Workforce only can convert your input output that's the process they can reduce the output so no employee second point which says that process has not been acquired as security and cleaning services security and cleaning services they can be they are very minor they can easily be replaced so this is not a very substantive process that is so important for you to convert input into output this you can replace it very easily so this shows that you have not acquired the substantity process therefore this is an asset accusation and not a business this is how you come to conclusion in this type of questions okay now we are moving with this understanding similar understanding we are moving on to test your understanding six you have to apply the same thing here they approaches 100 percent they does not generate Revenue in this company operates in a Biotech Industry okay it has engaged into r d old headquarter employees Senior Management and highly skilled research scientists they have a similar fair value each of the kofta's asset has a similar fair value the question I have when I was copy pasting it the question did not come here but the question is this one same question discuss whether kofta constitutes a business the honey and kofta okay now go by the optional always start with the optional concentration test when this question is asked whether it's a business or not so tell me whether this is met or not it's very easy you have to see the fair value whether it is concentrated in a single asset or a group of similar assets or it is not concentrated if it is not concentrated consider optional concentration test is met and if it's so if it's not met so here the fair value of the total asset is not concentrated in a single asset there are so many assets here it's not one single asset so the fair value is not in one single asset therefore optional concentration is not met because the optional concentration test is to is the test to say that is not a business if the concentration test is met it's not a business if it's not met it's a business next we have to see the information from the case study again this three input process and output you have to see whether they have acquired this three first we'll go by the input it's not mad means this is a business okay from the optional concentration test conclusion is it's a business now we are moving on to the three input process in our contain bolt they have purchased the input Tani has purchased input how r d decision development tangible assets and employees all these are inputs next what about the E process whatever the process they have acquired it or not substantity process has been acquired or not yes they have they have experienced highly skilled employees because you need experienced employees to change your input into output this is the whole substantive process without the scientist without the experience employees you cannot change here you need them so this is that substantiary process in this case in this because look at the company it's a Biotech Industry you have to see the industry which you're working this is not with machines you need humans here that is the substantity process in this type of companies the knowledge of your employees because they have the knowledge and they are capable of turning the input into for example in progress r d into finished marketable products so input is done process is down okay this accusation is a business combination because it has met the optional test and also it has acquired input and the substantive process therefore this is a business combination now we'll be moving on to the accusation accounting accusation accounting accusation method has the following requirement number one identifying the acquire number two what is the accusation date recognize and measure the subsidiaries assets and liabilities recognize a good will so whenever an accusation happens this is accusation of a business I'm talking about not asset then there's four things you need to identify the acquirer the acquisition date the assets and liabilities needs to be measured and calculate Goodwill and any non-controlling interest non-controlling interest comes when you have purchased less than 100 percent let's say you have purchased 70 so 30 is the non-controlling interest if you have purchased hundred percent of interest in another company there is not any non-controlling interest it is zero then that stage is easy so now we are going to go through the four stages one by one first stage identifying the acquirer okay this is normally the one who has control over an identity okay acquires the person or the entity who have acquired the control over another entity let's say light up is one dollar million to obtain sixty percent in pan so liar is the acquiring company now it is sometimes not clear from the fact Who is the acquirer in this case ifrs3 gives you guidance such as acquire is normally The Entity that has transferred some cash or some assets or if it does not involve any transfer of cash or assets then the one who have issued a security interest that is the acquirer now there are some more facts to consider number one acquirer is usually the entity whose form of management domain is the combined entity second acquired is usually the entity whose owners have the larger portion of voting rights that means more than 50 percent voting right should be with the acquirer if it's less than 50 he is not that well acquirer is normally the bigger entity right it makes sense right the bigger one taking over the small ones right so now we'll be doing some questions before we move on to the second the following three steps that is the accusation date and the assets liabilities and recognizing good understanding just understanding seven identifying the acquirer now there are three companies here okay the first two companies are Abacus and calculator the fair value is 100 million five workers and 64 calculator now what Abacus did he Incorporated a new company called phone okay so now phone issues its share to the shareholders of application calculator after this phone is 60 owned by app course 40 by calculator and on the board of the phone four of the former directors of app course and two of the formulators have calculated okay if you go by the first point see when you cannot decide through the transfer of cash or other assets you have to see who has issued a great interest there has been no transfer of cash or other assets but who have issued the equity interest it is the phone looks like phone is the acquirer but wait hold on you need to go through other information what is it the three points three points just now we went through the previous slide who has who controls the management I mean which management team dominates the boat the form of management the dominant is the new combined company it is apcus because app course is owned sixty percent whereas calculate is 40 percent app course is more okay regarding the Voting Rights voting diet sorry voting right is more for app course than calculator even if you go by the proportion app course is more app course is having four former directors where his calculator is only having two so there also applicants is more okay acquire this normal identity whose size is greater than other entities if you go by the size also app cases more abcus has a fair value of 100 million whereas calculated 60 million so all the three points points towards Abacus as the acquirer right if you see Abacus is the one who incorporates a new company that is found to enable a business combination with calculator so Abacus is the acquirer in this question now moving on to the next that is the accusation date the next important thing in accusation accounting is the accusation date this is the date when acquired adopters the control over the acquiry okay and this is the date when you must calculate Goodwill and also the income and the expense of the acquiry will be Consolidated from this date onwards third identifiable assets and liabilities okay all identifiable assets and liabilities needs to be measured at their fair value at the accusation date okay now ifrs3 says an asset is identifiable if it is capable of being separately sold from the business owning it or it arises from contractual or legal rights regardless of whether those rights can be sold separately or not and identifiable assets and liabilities of the subsidiary should be recognized at fair value if they meet the definition of assets and liabilities in the conceptual framework are exchanged as a part of business combination rather than a separate transaction that means due to this business combination you are buying or selling assets and liabilities of the subsidy if you are separately purchasing assets and liabilities then it does not come under business combination you have to deal it according to that particular standard now you need to watch out for the following terms contingent live letters contingent liabilities are recognized at fair value at the accusation date even if the economic output is not probable okay in fact almost all the things needs to be recognized at fair value this is the easier thing for you to remember in acquisition accounting everything that we have value but some things need not be measured liabilities yes provision for future operating losses you do not why you cannot create this why because this is a post accusation item it is something in the future in the future that is after accusation so at the accusation date you cannot recognize it it comes in the future post accusation item restructuring costs are only recognized to the extent that liability actually exists at the accusation date otherwise no if it's after the accusation date even restructured in cost you do not recognize otherwise yes okay now items that do not meet the definition of assets or liabilities are subsumed in the calculation of Goodwill now another term is intangible asset if you have bought an intangible asset that also needs to be recognized at fair value only if they are separable or arise from legal or contractual right okay this means parents recognize an intangible asset in the Consolidated financial statement that the subsidiary did not recognize in their individual financial statements for example in generally generated brand name right internally generated brand name you do not recognize it you cannot recognize it but when you are consolidating it you are recognizing it parent is recognizing it in the Consolidated financial statement but the subsidiary he do not recognize it in his individual financial statement next item is Goodwill Goodwill in the subsidy is financial statements individual financial statements are not Consolidated understand this why because you cannot separate them they are not separable and it does not arise from any legal or contractual right no there are some exceptions regarding the measuring the assets and liabilities at fair value of the subsidiary what is it how what is it these are the four things any assets and liabilities that follow within the scoop of this four standard you have to follow those standards rather than fair value number one income tax if there is deferred tax is-12 rule applies not the fair value is 19 employee benefits IFRS to share this payment IFR is five non-colon assets helper sale for this four standards if the asset Falls in this four standard preference has to be given to these four standards over I've already that means according to iver's this fair value but if it's not Fairway according to these four standards then you have to value your assets and liabilities of the subsidiary according to this first standards if any standard is outside this four then all these assets and liabilities follows I bar is three that means fair value only for this for their exceptions okay now we'll be moving on to question before we move on to our last that is Goodwill test your understanding eight okay so in this question you are required to discuss with calculation the fair value of assets identifiable net asset okay now one by one will touch Okay purchase sixty percent that means s is the subsidiary because more than 50 at accusation date share Capital was 10 000 return earning was 190 000. property planning equipment has a carrying amount of 10 000 but fair value is fifty thousand included within the intangible was Goodwill of 220 000 which arose on the purchase of trade and assets of sole Trader business as has an internally generated brand that was not recognized in accordance with is 30. directors believe that farewell is 150 000 of this brand in accordance with is-37 okay they disclosed the financial statements affected as disclose the fact that a customer has initiated legal proceedings against them okay if the customer wins which a lawyer has advised is unlikely that means the entity is more likely to win not the customer estimates damages would be around 1 million fair value of this contingent liability is 100 000 at the accusation date the actors of P wishes to close one of the division of s they estimate that this will cost 2200 000 in redundancy payment so when you answer this question answer it according to the paragraphs given to you for example first paragraph you will be talking about property planning equipment then intangible asset then the brand the Goodwill then one is for provision one is for the redundancy payment so you'll be having around five to six paragraphs okay break down this into different paragraphs the answer okay so the first in your separate financial statements okay the net asset will be just the Shia capital plus the retain earnings that's it no adjustments in your separate financial statements that is ten thousand plus 190 000. okay 10 000 plus 190 000 which will be equal to two hundred thousand this is the net asset in the individual financial statements but when you're consolidating it okay you have to make adjustments everything will be at fair value at the accusation date now one by one will touch property planning agreement okay land has a carrying amount of ten thousand in the individual financial statements it will be ten thousand but when you're consolidating it you have to increase it up to the fair value so 50 minus 10 40 000. okay see when you're making you have to do the calculation okay to find the fair value of identifiable net assets at accusation so first let's start with share capital and return on is there is no change in this two Shah Capital was ten thousand detail earning was 190 000. coming to the LAN family uplift from 10 to 50 so it's 40 000. you have to add Lan is an asset it will increase your fair value then we have Goodwill Goodwill is the next okay discussion part you can do it on your own I'm just explaining you briefly okay Goodwill twenty thousand this was already included so for explanation what should you write say Goodwill in the subsidy is own financial statements they you will not write it why because they are not separable you cannot dispose them separately from the rest of the business that's why this is not recognizing the Consolidated financial statement also you don't take the Goodwill of subsidiaries in the Consolidated financial statement therefore you have to deduct this 20 000 why because it was already included within the intangible asset to take out the twenty thousand now what's next the brand internally generated brand okay this was not recognized in the individual financial statement right but in the consolidated it should be recognized at its fair value internally generated I said yes you can recognize it only good will you cannot recognize in the consolidated fair value is 150 000. so Brian it will increase your net asset so you add 150 000. coming to the next that is what contingential liability okay there was a contingent liability family was given at accusation date at hundred thousand yes you recognize contingent liability you disclose them in the individual financial statement but in the Consolidated financial statement you recognize it okay because contingent liability reduces the family of net asset see assets are added libraries are deducted okay so you deduct the contingent liability okay now one more is there that is redundancy payment you do not make any adjustments to the redundancy payment why why because at the accusation date there is no obligation for you to make this payment therefore redundancy payment you just ignore it so after this you calculate your net asset that is 270 000 this is your net asset at accusation fair value of net asset at accusation the last and the fourth important point to remember about accusation accounting is you need to calculate Goodwill okay and this Goodwill is calculated as the difference between fair value of consideration plus your NCI other accusation date so you add your consideration plus non-controlling interest and deduct your fair value of net assets identifiable net assets and liabiliters okay we'll be soon doing a question on this to better understand picture this now purchase consideration it's very important when you are calculating Goodwill this purchase consideration also has to be at fair value in short everything is measured at fair value in accusation Accounting in consolidation that is under eye RS3 okay now when you are determining the fair value of consideration you have to take care of certain things contingent consideration sometimes consideration might be contingent that means you are not immediately paying it in cash but it is based on some condition or later on your window page so this you have to include in your consideration in your purchase consideration you have to add the contingent consideration okay even if the payment is not deemed improbable you have to take it okay so and the fair value of this contingent consideration is will incorporate the probability of payment occurring okay next accusation cost any accusation cost are excluded from purchase consideration you need to remember this like legal fees or professional fees they are expenses that goes to profit and loss regarding any debt or Equity issue cost they are accounted according to ifrs9 okay now next purchase consideration like rather than just paying in cash you can pay in shares right replacement share based payment scheme we have just covered irs2 in my previous lecture so you know the all the rules of I power is two okay you can pay in share based payments so when you decide to do that what happens that also you can include in your consideration okay so if the acquirer is obliged to issue the replacement share-based payment to employees in exchange for their existing scheme okay they already have an existing scheme the sub the employees of the subsidiary already have some scheme so if you if they acquire want to replace that scheme with the existing scheme then the fair value of the replacement scheme must be allocated between two things one purchase consideration next post accusation remuneration expense okay now anything okay you have to understand that for purchase consideration the amount cannot be more than the original share scheme at the date of accusation it should be up to that amount anything beyond that will be recognized as post accusation service after the acquisition whatever the services the rumination expense so it is dealt according to ifrs2 ifrs2 we have just finished in my previous lecture if you have not watched my iPhone S2 lecture please go and watch it stay on my playlist okay now we'll be doing a question on this purchase consideration test your understanding nine purchase consideration okay so the purchase consideration has been given to you in various forms you just have to calculate the fair value of consideration okay cash paid three hundred thousand cash to be paid in one year's time two hundred thousand hundred sorry ten thousand shares in B they have a nominal value of 1. fair value is three dollar each 250 000 to prepare in one year's time if s makes a profit before tax of more than 2 million there's a fifty percent chance of this happening okay the family of this contingent consideration can be measured as of the present level of the expected value okay next p is required to replace a share based payment scheme previously granted to S by the accusation date the employee have rendered the service but they have not exercised the option the fair value is 400 000. and the family of the peace replacement award which has no post accusation vesting condition attached was 500 000. legal fees is ten thousand discount rate is 10 percent so with all this information you should calculate the consideration fair value of consideration okay now one by one cash pay 3000 you can take it as it is you don't have to discount or do anything okay so let us do that cash paid three hundred thousand as it is you can take what about the next cash to be paid in one year's time it is known as deferred cash the second one okay when you're working out the default cache you have to discount it to the present value the two hundred thousand okay just ten percent in one year's time so it will be two hundred thousand into one divided by 1.1 to the power one because in one year's time and discount rate is ten percent is given so it will be the present value will be 181 818 Okay the third one is the shares you can pay the consideration also okay shares if you see 10 000 shares and fair value is three so ten thousand into three which will be 30 000. but if you see here see regarding this deferred cache okay you have to recognize a liability also for the second one there's a corresponding entry the liability and share consideration okay credit entries will be share Capital ten thousand because nominal value is one share premium is twenty thousand out of the thirty thousand twenty thousand is share premium and ten thousand is the share capital the credit entry when you're explaining this point you have to write that credit entries will be this and where I will and there'll be a liability but when you're doing the calculation this is enough the workings next contingent consideration the fourth bullet point contingent consideration see when you are taking considering contingent consideration okay it takes the probability of the payment and the time value of money both you have to incorporate just now in the previous slide we went through contingent consideration and it and it tells you to incorporate the probability of payment so there's a 50 chance of the payment okay and the time value is 10 discount okay so this 250 000 this is the working I am showing you fifty percent of chance of happening in two you have to discount it okay so it adds up to I'm writing the figure here one one three six three six okay now what's next the last one that is replacement shape is payment replacement share based payment okay so for share based payment you are only writing up to 400 000 to the fair value okay because this is the five value of the original scheme of the accusation date this 400 only up to 400 000 you can recognize what about this 500 the remaining hundred thousand goes as an expense in the piano so you are only recognizing up to 400 000 in purchase consideration the remaining hundred thousand okay because five hundred thousand out of 500 400 is purchase consideration remaining hundred thousand goes in the p l as an expense because it is a post accusation expense okay next come into legal phase this also goes as an expense in the piano okay so hold it this you add up all this now okay which is equal to one zero two five four five four one million 25 454. this is the fair value of your consideration make sure that in each paragraph you explain the reasons and how you have got this amount this figure calculation okay you have to show it so now we'll be moving on to NCI and Goodwill controlling interest okay so the way you calculate Goodwill depends on the method that is chosen to Value NCI there are two ways okay method one is known as proportionate share of net asset which is you take the percentage of NCI and multiply with the fair value of your net asset of the subsidiary the accusation date second method is the easier method where the fair value of the net asset is already given to you and this is given in the question So based on this your Goodwill will be different okay NCI that is based measured based on the first method the proportionate share okay it is another word for proportionate the NCI measured on proportional chair is partial Goodwill method okay that means the Goodwill that you have calculated it is only for the acquires the parent okay it is only the paid and share of good with but if the Goodwill is measured based on the fair value of NCI another word for it is full Goodwill method then you have to proportionately divide the Goodwill among the parent and the NCI that means acquired in the NCR now let us do a question on this test your understanding 10 okay here you have to calculate Goodwill according to the two methods but you have to use your answer from test understanding eight and nine why because you need the consideration as well as the net asset okay so let us do that according to a fair value okay you can do it simultaneously one after the other okay here I will write the fair value a here it is proportionate method so here consideration okay this is how you calculate Goodwill just check the steps first you write the consideration already you have calculated in test understanding 9. from there I am taking this figure this will be same one zero two five four five four one zero two five four five four then you add second step is add NCI here for fair value you have to take this 160 000. but for Part B okay what you have to do is you have acquired sixty percent okay if you can recall the question or you can go back to my video that part and check you have record sixty percent so NCAA is forty percent forty percent of net asset net asset you have calculated at 270 000. interesting eight so it is one hundred and eight thousand now you deduct this is your third net asset family of net asset this you have got in test your understanding it as 270 000. you deduct so here it will be 915 4 here the Goodwill is 863 454. this is the good way this is how you calculate Goodwill in any question in SBR this is the format okay now if you see can you see any difference Goodwill is higher in Fair Value under proportional method why is it so because this Goodwill has the Goodwill of two parties one is the parent one is the NCI that's why it's higher than the proportionate method whereas this Goodwill is totally attributable to the parent that's why it's lower okay now we'll be moving on to the next term that is known as bargain purchase what is bargain purchase bargain purchase means when your net asset is more than the consideration that you have transferred so in this case you are going to get a negative Goodwill okay negative Goodwill means it's a gain or a bargain purchase which is good for you right so the accounting treatment is you have to do two things first check for the accuracy because the negative Goodwill this condition is very rare okay that's why first you have to look whether there has been any errors made while you are calculating net asset or consideration transfer first check for the accuracy once accuracy is checked it's accurate second is Goodwill is credited immediately to profit and loss it's an income now okay credited to profit and loss the negative Goodwill next measurement period this is the last for this lecture okay for IFR S3 okay the ifrs3 says during the measurement period if you get any new information you have to go back and change retrospectively retrospectively means going back in the past and changing the figure so you have to adjust the amount that was recognized at the accusation date if you get any new information okay but it's not just any new information okay it needs to reflect to reflect new information about facts and circumstances that existed as of at the accusation date if there were any circumstances are facts that you know at the accusation date and during the measurement period there has been some new information then you have to change it okay this measurement period you have to know during that measurement period you have to make the changes so because you make the changes your good will also will change you have to adjust your Goodwill also okay so and this measurement period is no more than 12 months after the accusation date that means after the accusation date the 12 months after the accusation date that period is known as measurement period any changes any new information comes up you have to make changes changes to your Goodwill right anything which is beyond 12 months that's it for 14 months or 15 months after the accusation date you don't have to make the changes you don't have to come back retrospectively and make the changes okay now let us do the last question on this measurement period so this is an illustration for the measurement period okay on 31st December 2001 we are quite hundred percent of s okay for sixty thousand so sixty thousand is the consideration and on that date fair value of net asset was forty thousand okay so if you deduct there will be no NCI because you have a quite hundred percent so consideration did minus your net asset which is 60 000 minus 40 giving you twenty thousand of Goodwill now on 30th June 2002 check the time from 31st December 2001 to 30th June it is within 12 months right after six months so This falls in the measurement period okay they told net asset was actually 50 000. so now it will be 60 minus 50 giving Goodwill of ten thousand you see you have to make adjustments to the Goodwill now because it falls within 12 months foreign okay first one is definition of a business okay where one entity obtains a control over another entity and business will have inputs process and output there's a concentration test that is done to assess whether you have acquired what you have acquired is not a business and it's an asset if the concentration test is met then it's an asset accusation okay coming to acquisition accounting we went through identifying the acquire there are lists to identify the one who has bigger voting rights whose management dominates former management dominance the combined entity right who's who's exchanging assets or cash things like that there is there's a big list next determining the accusation date on this date you calculate Goodwill third you recognize and you measure the subsidies assets and liabilities at fair value and you recognize Goodwill okay sometimes it could be a game for example a negative good film where your net asset is more than your purchase consideration and if you have any non-controlling interest so that's it for ifrs3 there are lots of questions in your SBR all your question one from your past paper in SBR is using ifrs3 so please go and do you will not see any question where ifrs3 is not tested please go and check and do both the discussion part as well as the calculation part so take care and see you in the next lecture which is again a very small lecture IFR is five non-colon SSL for sale and discontinued operation