IFRS 3

Question 1

Define Goodwill under IFRS 3

Answer 1

An asset representing the future economic benefits arising from assets acquired in a business combination that are not individually identified and separately recognised.

Question 2

How goodwill acquired in a business combination should be measured at initial recognition and in subsequent accounting periods

Answer 2

• The price paid by the acquirer in the business combination
• Acquirer’s interest in the net fair value of identifiable assets and liabilities at acquisition date.

Goodwill acquired in a business combination
- should be tested for impairment in each subsequent accounting period and
- should be measured at the amount initially recognised less any accumulated impairment losses.

Question 3

Accounting treatment for negative goodwill

Answer 3

IFRS 3 requires that the fair value of the price paid by the acquirer and the fair value of the identifiable assets and liabilities acquired should be reassessed.

Any negative goodwill which still remains after should be treated as income from a bargain purchase and should be included in the acquirer’s P&L