CERTYNEX IFRS ACADEMY

In a business combination, a colleague takes the whole fair value of a replacement award, 500,000, to the consideration transferred, on the ground that it replaces an award held by employees of the acquiree. What is the error?

The whole should have been expensed at the acquisition date, the replacement award being later than the taking of control, with no spreading over the remaining period of the plan.

The replacement award should have been ignored in the combination, the acquirer not having to account for it.

The fair value should have been split equally between the consideration transferred and the post-combination expense.

Only the part relating to pre-combination service is part of the consideration transferred; the part relating to post-combination service is an expense over the remaining period.