Classification and designation at the acquisition date

Learning objectives

• Determine the classification or designation of an acquired instrument or contract on the basis of the conditions as they exist at the acquisition date.L2, L3

Normative references

• IFRS 3 §15At the acquisition date, the acquirer classifies or designates the identifiable assets acquired and liabilities assumed as necessary to apply other IFRSs subsequently, on the basis of the contractual terms, economic conditions, its operating or accounting policies and other pertinent conditions as they exist at that date. The examples (classification of financial assets and liabilities under IFRS 9, designation of a hedging instrument, separation of an embedded derivative) are in para. 16.
• IFRS 3 §17Exception to para. 15: the classification of a lease contract in which the acquiree is the lessor (operating lease or finance lease under IFRS 16) is based on the contractual terms and other factors at the inception of the contract (or at the date of a modification that would change its classification, which might be the acquisition date). The former exception for insurance contracts has been deleted (subparagraph (b), amendment by IFRS 17, para. 64N).

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

2 questions

• At the acquisition date, on what basis does the acquirer classify or designate the identifiable assets acquired and the liabilities assumed, for example a financial instrument?L2
• Prima SA acquires Dolce SA, which holds a loan that Dolce originally classified in an IFRS 9 category based on its own management practices. Case assumption: at the acquisition date, Prima's existing conditions and management practices lead, under IFRS 9, to a classification different from Dolce's. Which classification does Prima adopt in the consolidated financial statements?L3