Liabilities within IAS 37 or IFRIC 21

Learning objectives

• Explain why, for liabilities within the scope of IAS 37 or IFRIC 21, the acquirer applies those pronouncements rather than the Conceptual Framework to determine whether an obligation exists.L3, L4
• Justify, from a levy or tax case, whether or not a liability is recognised at the acquisition date.L3, L4

Normative references

• IFRS 3 §21AException to the recognition principle (May 2020 amendment, para. 64Q): for liabilities and contingent liabilities that would be within the scope of IAS 37 or IFRIC 21 if they were incurred separately, the acquirer applies paras. 15 to 22 of IAS 37 (whether a present obligation exists as a result of a past event) or IFRIC 21 (whether the obligating event that gives rise to the levy has occurred by the acquisition date), rather than only the definition in the Conceptual Framework (paras. 21A and 21B); a present obligation so identified may be a contingent liability, accounted for under para. 23 (para. 21C).

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

1 question

• 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?L4