Completing the initial allocation

Learning objectives

• Determine the deadline for completing the initial allocation of goodwill (before the end of the first annual period beginning after the acquisition date) and the link with provisional accounting under IFRS 3.L2, L3

Normative references

• IAS 36 §84If the initial allocation of goodwill cannot be completed before the end of the annual period in which the business combination occurs, it must be completed before the end of the first annual period beginning after the acquisition date.
• IAS 36 §85Under IFRS 3, if the initial accounting for a business combination is only provisional at the end of the period, the acquirer uses provisional values and adjusts them during the measurement period (not exceeding twelve months); the initial allocation of goodwill may then not be completed in that period, in which case the disclosures in paragraph 133 are given.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

8 questions

• True or false? If the initial allocation of acquired goodwill cannot be completed before the end of the annual period in which the business combination takes place, it must be completed before the end of the first annual period beginning after the acquisition date.L2
• True or false? As long as the integration of the acquiree is not complete, the acquirer may defer the initial allocation of goodwill to CGUs without any time limit.L2
• True or false? When the initial accounting for a business combination can be determined only provisionally at the end of the reporting period, the initial allocation of goodwill may not be completed during the period of the combination; the entity then provides the information required by paragraph 133.L3
• Valtera, whose reporting date is 31 December, acquires Brisol on 1 October 20X1. The initial allocation of goodwill is not complete at 31 December 20X1. What is the deadline for completing it?L2
• The Sorelis group's annual periods end on 30 June. It acquires Kalinor on 1 March 20X1. At 30 June 20X1, the initial allocation of goodwill is not complete. By what date at the latest must it be completed?L3
• On 1 November 20X1, Aquilon acquires Brumelle; its reporting date is 31 December. At that date, the valuation of Brumelle's intangible assets is not finished: goodwill is recognised on a provisional basis under IFRS 3, and its allocation to CGUs is not complete. Which approach complies with IAS 36?L3
• The Corvane group, whose reporting date is 31 December, acquired Delmont on 1 February 20X1. The integration programme is due to last until mid-20X3, and management wishes to wait until it ends, in 20X3, to allocate the goodwill to CGUs, as the final organisation has not been decided. What position should the auditor take?L3
• Why may the initial allocation of goodwill not be completed at the end of the annual period in which the business combination took place?L2