Which standard is responsible for recognizing Goodwill arising in a business combination?

Which standard is responsible for recognizing Goodwill arising in a business combination?

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

Answer: (B)

Recognizing goodwill arising from a business combination is handled by IFRS 3. Under IFRS 3, you apply the acquisition method: identify and fair-value the assets acquired and liabilities assumed, and any excess of the consideration transferred over those fair values is recorded as goodwill. This goodwill reflects the premium paid for expected synergies, assembled workforce, and other unidentified benefits from the combination. It is not amortized; instead, it is tested for impairment regularly (under IAS 36). The other standards cover different areas—IAS 38 deals with intangible assets that aren’t tied to a business combination, IFRS 15 covers revenue from contracts with customers, and IAS 2 concerns inventories.

Recognizing goodwill arising from a business combination is handled by IFRS 3. Under IFRS 3, you apply the acquisition method: identify and fair-value the assets acquired and liabilities assumed, and any excess of the consideration transferred over those fair values is recorded as goodwill. This goodwill reflects the premium paid for expected synergies, assembled workforce, and other unidentified benefits from the combination. It is not amortized; instead, it is tested for impairment regularly (under IAS 36). The other standards cover different areas—IAS 38 deals with intangible assets that aren’t tied to a business combination, IFRS 15 covers revenue from contracts with customers, and IAS 2 concerns inventories.