Deferred tax in a business combination

In a business combination, the assets acquired and liabilities assumed are recognised at fair value with no equivalent tax adjustment: temporary differences arise, and the related deferred tax is part of the combination, which changes goodwill. Non-deductible goodwill gives no liability. If the combination makes the acquirer's own losses recoverable, the asset is recognised in profit or loss, outside the combination. Acquired tax benefits recognised later reduce goodwill if they result, during the measurement period, from new information about facts existing at acquisition; otherwise they go to profit or loss.

In this lesson

1. 2Understand
2. 3The IFRS rule
3. 4Why?
4. 5How to apply it
5. 6Numerical example
6. 7Journal entry
7. 8Key points
8. 9Exercises