Remeasuring the previously held interest

Learning objectives

• Calculate the gain or loss on remeasuring the previously held equity interest at its acquisition-date fair value.L2, L3, L4
• Calculate goodwill in a business combination achieved in stages, including the fair value of the previously held interest.L2, L3, L4

Normative references

• IFRS 3 §41Business combination achieved in stages (step acquisition): the acquirer obtains control of an acquiree in which it held an equity interest immediately before the acquisition date; para. 41 gives the definition and an example. The accounting for the previously held interest is governed by para. 42, and its fair value is included in goodwill (para. 32).
• IFRS 3 §42In a business combination achieved in stages, the acquirer remeasures its previously held equity interest at its acquisition-date fair value and recognises the resulting gain or loss, if any, in profit or loss or in other comprehensive income, as appropriate. Amounts that the acquirer had recognised in other comprehensive income in respect of that interest are recognised on the same basis as would be required if it had disposed directly of the interest: they are reclassified to profit or loss only if a direct disposal would require it.

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

4 questions

• Mont SA held 30% of Aval SA, carried at {carrying_amount}. On 30 September, it acquires a further interest that gives it control; the fair value of its previous 30% at that date is {fair_value}. Case convention: an equity-accounted interest, whose remeasurement falls in profit or loss; no amount has been recognised in other comprehensive income in respect of this interest. Calculate the remeasurement gain on the previously held interest.L3
• Orchis SA held 25% of Pivert SA, carried at {carrying_amount}. At the date it obtains control, the fair value of those 25% is {fair_value}. Case convention: an equity-accounted interest, whose remeasurement falls in profit or loss; no amount is accumulated in other comprehensive income; the entry is made at business combination level. Record the entry remeasuring the previously held interest.L3
• Sol SA held 20% of Lune SA, carried at 600,000; it buys a further 55% for 2,700,000 in cash and obtains control. At that date, the fair value of the previous 20% is estimated at 900,000, the 25% non-controlling interest at 800,000 (fair value) and Lune's identifiable net assets at 3,900,000. Case convention: an equity-accounted interest, whose remeasurement falls in profit or loss; no amount is accumulated in other comprehensive income. Write a note concluding on the profit in profit or loss and on goodwill, distinguishing facts of the case, rule and professional judgement.L4
• Just before 1 April, Pélan SA held 30 per cent of Quercy SA, its associate. On 1 April, it acquires a further 40 per cent and obtains control of Quercy. Case data: Quercy is a business. How should the transaction be classified?L2