CERTYNEX IFRS ACADEMY

Durance SA acquires Tarn SA on 1 June. Tarn is subject to an annual levy that falls within IFRIC 21. Case assumption: under IFRIC 21, the obligating event for the levy is Tarn's presence on the market on 31 December; it has not occurred at the acquisition date. How does Durance treat the levy in the purchase price allocation?

It applies the Conceptual Framework, which allows the obligation to be anticipated since the obligating event of the levy will occur at the end of the reporting year.

It recognises the levy liability for the fraction of the year elapsed at the acquisition date, pro rata by months.

It applies IFRIC 21 to determine whether an obligation exists at the acquisition date, in light of the obligating event in the case.

It recognises the levy liability for the whole year, because Tarn will in fact have to pay it during the reporting period.