Issue related to the full goodwill method

The Board considered an issue related to the allocation of the full amount of the goodwill between the controlling and the minority interests in an acquisition of a less than 100% controlling interest in a subsidiary. The Board had already agreed that the goodwill attributable to the controlling interest should be calculated as the difference between the consideration paid for that interest and the controlling interest's share of the fair value of the identifiable net assets acquired. The remainder of the goodwill should be allocated to the minority interests.

The Board tried to clarify how goodwill should be allocated to the controlling and minority interests if:

• no consideration is paid by the acquirer (at the date of the business combination), or
• the consideration paid does not represent the total controlling interest owned because control was obtained as part of a step acquisition. The Board agreed with the methods the staff proposed but asked the staff to converge with the FASB wording to simplify the understanding and convergence of the two Standards. The staff should come back with redrafting paragraphs but the Board did not change its March meeting position. The Board considered the allocation of the goodwill impairment losses between the controlling and the minority interests in a cash generating unit that includes a partially owned subsidiary or is a stand alone partially owned subsidiary. The staff proposed that the allocation should be based on the relative carrying amount. The Board agreed with this. Acquired non-identifiable assets without physical substance The Board considered whether a non-identifiable asset without physical substance, that does not meet the criteria for recognition separately from the goodwill at the acquisition date, should be subsequently reclassified from the goodwill and recognised separately as an intangible asset if it meets the criteria for separate recognition as a result of an event after the acquisition date in the following limited circumstances:
  • The asset meets the criteria for separate recognition within 12 months of the acquisition date, and
  • Its fair value at the acquisition date is reliably measurable.
  The following examples might fit the above description: (a) Technology-based items
  • Technology developed by the acquiree and nearing the final stage of certification at the date of the acquisition.
  • Pending patent for a new drug that has, at the acquisition date, cleared all preliminary clinical trials.
  (b) Contract-based items
  • Rights arising from a pending operating licence (when the application for the licence was made before the acquisition date) that is granted to the acquiree after the acquisition date.
  • Rights arising from a pending broadcasting licence nearing the final stage of approval at the acquisition date.
  • Rights arising from the franchise agreement, the terms of which are agreed in principle by the acquiree and the counter party before the acquisition date, but which is finalised and signed soon after the acquisition date.
  • Rights arising from a construction, management, service or supply contract, the terms of which are agreed in principle by the acquiree and the counter-party before the acquisition date but which is finalised and signed soon after the acquisition date.
  The staff proposed to not separate the intangible asset from the goodwill even if after subsequent events the intangible asset meets the criteria for separate recognition. Some Board members noted that assets would be not amortised, others that it would be caught by an eventual depreciation through the impairment test. Some Board members also noted that this might be affected by the recognition of contingent assets. The Board did not conclude on this subject and the topic will be brought back on the next agenda.