IFRS 3 Business Combinations

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International Financial Reporting Standard 3 ‘Business combinations’ (IFRS 3) and its requirement to recognise separately from goodwill identifiable intangible assets introduced much greater transparency in financial statements.

IFRS 3 requires a much more robust approach in ascertaining the fair value of net assets acquired in a business combination. The revised version of the standard (effective for acquisitions arsing in financial years which start on or after 1 July 2009) will further change the way in which acquisitions are accounted for.

Some of the intangible assets that need to be separately recognised under IFRS 3 include: customer lists, brands, royalty agreements, trademarks, databases and magazine titles.

Our Financial Reporting Advisory team has carried out valuations of such items under both IFRS 3 and its US equivalent, FAS 141. We can help your company provide the investment community with assurance that the process has been rigorously conducted and is free from management bias.

We can also help conduct the impairment reviews that will be at least an annual occurrence under IFRS. Given the potential effects on future earnings of incorrectly valuing assets on acquisition, having an experienced independent valuer on hand to help you with the process may prove essential.