Business combination implications of IFRS 3
Our specialists understand the increasing significance and complexity of valuing tangible and intangible assets. We adopt a practical approach to the PPA process.
Accounting for business combinations requires an extensive investigation by an acquirer to detect, recognise and measure at fair value the tangible and intangible assets and liabilities acquired in a transaction.
The revised version of IFRS 3 Business Combinations has drawn renewed attention to corporate transactions, a complex and developing area of financial reporting.
The particular challenge relates to intangible assets which are harder to identify and value than tangible assets. Estimation techniques are required to determine the fair value of intangible assets as quoted prices are rarely available. Intangible resources not recognised as intangible assets are subsumed into goodwill.
Goodwill vs. other intangible assets As most intangible assets must be amortised and goodwill is measured under an impairment only approach, some acquirers might be motivated to report fewer intangibles and higher goodwill. The problem is a high goodwill figure can create the impression that the acquirer has overpaid for an asset.
As a result, acquirers can expect reported amounts of intangible assets and goodwill to be closely scrutinised by investors, analysts and regulators.
Each PPA is unique and requires a high level of adaptability, flexibility and innovation, which we pride ourselves on being able to offer.
Strong technical expertise
Grant Thornton South Africa, supported by Grant Thornton International’s dedicated IFRS team, is committed to high quality and consistent application of IFRS. Our strong professional standards division is led by one of the country’s leading experts.
Proven track record
Grant Thornton South Africa’s corporate finance team has performed valuations and PPA’s for listed and unlisted companies in a broad range of industries. We have the credentials and the expertise to perform an independent PPA on your behalf.