IFRS for SMEs Business Combinations and Goodwill Flashcards

Under IFRS for SMEs, how must all business combinations be accounted for?

Answer: Using the purchase (acquisition) method

IFRS for SMEs Section 19 requires all business combinations to be accounted for using the purchase (acquisition) method without exception.

Under IFRS for SMEs, when the useful life of goodwill cannot be estimated reliably, it is presumed to be amortized over a maximum of:

Answer: 10 years

IFRS for SMEs Section 19.23 presumes goodwill has a useful life of 10 years when a reliable estimate cannot be made.

On the acquisition date in a business combination, the acquirer measures identifiable assets acquired and liabilities assumed at:

Answer: Fair value

Under IFRS for SMEs Section 19, identifiable assets and liabilities are measured at their fair values at the acquisition date.

Under IFRS for SMEs, if the cost of a business combination is less than the fair value of identifiable net assets acquired (negative goodwill), the acquirer should:

Answer: Recognize the excess as a gain in profit or loss immediately

Under IFRS for SMEs Section 19, any excess of fair value of net identifiable assets over cost is recognized immediately as a gain in profit or loss.

Under IFRS for SMEs, goodwill is tested for impairment:

Answer: Only when impairment indicators exist

IFRS for SMEs uses a trigger-based approach, requiring impairment testing of goodwill only when indicators of impairment are present.

Under IFRS for SMEs Section 19, the cost of a business combination includes directly attributable acquisition costs (e.g., legal fees). How does this differ from full IFRS (IFRS 3)?

Answer: IFRS for SMEs capitalizes acquisition costs; full IFRS expenses them

IFRS for SMEs includes directly attributable acquisition costs in the cost of the combination, whereas full IFRS 3 requires these costs to be expensed as incurred.

Which of the following is a condition for recognizing an intangible asset separately from goodwill in a business combination under IFRS for SMEs?

Answer: It must be separable or arise from contractual or legal rights

An intangible asset is recognized separately from goodwill if it is separable from the entity or arises from contractual or other legal rights, meeting the definition of an asset.