IFRS 3 — Measurement of non-controlling interest (NCI)

Date recorded:

The IFRIC considered including illustrative examples related to the amendments to IFRS 3 Business Combinations to clarify that the option to measure NCI at the proportionate share of the acquiree's identifiable net assets should be applied only to those NCI components that are present ownership instruments and entitle their holders to a pro-rata share on the entity's net assets (as clarified at the January 2010 IFRIC meeting).

The IFRIC agreed with including of illustrative examples related to treatment of preference shares and share options. Nonetheless, a few IFRIC members expressed concerns about the calculation of the proportionate share of the identifiable assets in relation to preference shares and possibility of allocation of goodwill to ordinary and preference shareholders. The IFRIC concluded that the issue whether goodwill could be attributed to individual shareholders is beyond the Annual Improvements project and therefore the examples should be limited to illustrating the decision itself (and not reflect the measurement of the full double entry). As the IFRIC Chairman noted these issues relate to the choice of NCI measurement that was included in IFRS (2008) that was not fully reflected in the rest of the Standard that was conceptually written without this measurement choice.

In addition, the IFRIC agreed that the example illustrating share options should be limited to vested share options as there are further complications connected with vested conditions (part of it relates to non-controlling interest and part to future compensations cost).

On that basis, the IFRIC recommended to the Board to include these illustrative examples in the amendments.

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