If C is an external business not under common control of P:

(1) S acquires AND controls C and compensation transferred exceeds the fair value of the identifiable assets and liabilities acquired, then S recognizes goodwill (GW) as an asset which will become part of the GW reported by P in the consolidated financial statements. The acquisition is accounted for under IFRS 3 (2008).

(2) If C is an entity under common control of P, such transactions are scoped out of IFRS 3. Accounting for common control transactions were added as a research project to the board’s agenda in 2007. I personally don’t see their addressing this until after the convergence projects are completed.

However, it does not seem reasonable to me to create a new asset simply by rearranging the various parts of P.

Remember, in consolidation, the assets and liabilities of the subsidiaries (after elimination of intercompany transactions and balances) are what appear in the consolidated financial statements plus the equity accounts of the parent and any resulting minority interests. The equity accounts of the subsidiaries are eliminated as they are only the assets – liabilities.

Finding specific paragraph citations is an extremely time-consuming task. I will leave that to you. IFRS 3 appendix B does include guidance on determining whether the transaction is a common control transaction.

Patricia Walters