Measurement period adjustments

Learning objectives

• Calculate the effect of a measurement period adjustment on goodwill.L2, L3
• Record the retrospective adjustment with revision of the comparative information.L2, L3

Normative references

• IFRS 3 §45When the initial accounting is incomplete by the end of the reporting period in which the combination occurs, the acquirer reports provisional amounts; during the measurement period, it retrospectively adjusts them and recognises additional assets or liabilities to reflect new information about facts and circumstances that existed at the acquisition date. The period ends as soon as the acquirer receives the information it was seeking or learns that it is not obtainable, and shall not exceed one year from the acquisition date.
• IFRS 3 §46The measurement period is the period after the acquisition date during which the acquirer may adjust the provisional amounts; it gives the acquirer a reasonable time to identify and measure, as of the acquisition date, the identifiable assets, the liabilities and the non-controlling interest, the consideration transferred, the previously held interest (business combination achieved in stages) and the resulting goodwill or gain. Adjustments are retrospective (para. 45), against goodwill (para. 48), with revision of the comparative information (para. 49).

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

4 questions

• Acquisition of Brande SA on 1 October N. At the reporting date of 31 December N, the valuation of a patent is not complete. The valuer's report received on 15 March N+1 concerns facts and circumstances that existed at 1 October N. What treatment does Brande apply?L3
• Brise SA acquires 100% of Cirrus SA on 1 March for {consideration}. At the reporting date of 30 June, provisional identifiable net assets are {provisional_net_assets}. In October, before the end of the measurement period, information about facts existing at 1 March reveals an unrecognised liability: identifiable net assets are reduced to {revised_net_assets}. Case convention: there is no non-controlling interest or previously held interest. Calculate the retrospective adjustment to goodwill.L2
• Six months after the acquisition of Aulne SA, and before the end of the measurement period, Platane SA learns of a dispute that existed at the acquisition date and was not recognised, whose liability is measured at {new_liability}. Case convention: no deferred tax is to be considered and the retrospective adjustment is made at business combination level. Record the adjustment entry.L3
• Pluton SA receives two pieces of information before the end of the measurement period of a business combination: (1) a report shows that a plot of land was worth 200,000 less than the provisional amount at the acquisition date; (2) three months after the acquisition date, the main customer of the acquiree terminated its contract, reducing the value of a customer relationship by 150,000. Write a short note concluding on the treatment of each piece of information, distinguishing facts of the case, rule and professional judgement.L3