Which standard governs the recognition of Goodwill arising from a business combination?

Which standard governs the recognition of Goodwill arising from a business combination?

• A. A IAS 38
• B. B IFRS 3
• C. C IFRS 15
• D. D IAS 2

Answer: (B)

Goodwill from a business combination is recognized under IFRS 3. IFRS 3 requires you to measure the identifiable assets acquired and liabilities assumed at their acquisition-date fair values. Any excess of the consideration transferred (plus any non-controlling interest and/or fair value of previously held interests) over the net fair value of identifiable assets and liabilities is recorded as goodwill. This captures value elements like synergies and assembled workforce that aren’t separately identifiable. Goodwill isn’t amortized. It’s tested for impairment under IAS 36 at least annually or when there are indicators of impairment. Other standards serve different areas: IAS 38 covers other intangible assets, IFRS 15 deals with revenue from contracts with customers, and IAS 2 covers inventories.

Goodwill from a business combination is recognized under IFRS 3. IFRS 3 requires you to measure the identifiable assets acquired and liabilities assumed at their acquisition-date fair values. Any excess of the consideration transferred (plus any non-controlling interest and/or fair value of previously held interests) over the net fair value of identifiable assets and liabilities is recorded as goodwill. This captures value elements like synergies and assembled workforce that aren’t separately identifiable.

Goodwill isn’t amortized. It’s tested for impairment under IAS 36 at least annually or when there are indicators of impairment. Other standards serve different areas: IAS 38 covers other intangible assets, IFRS 15 deals with revenue from contracts with customers, and IAS 2 covers inventories.