Auditor - Business combinations

Auditor - Business combinations

SUBJECT	IFRS	US GAAP
Business combinations
Types	All business combinations are acquisitions.	Similar to IFRS.
Purchase method – fair values on acquisition	Fair value the assets, liabilities and contingent liabilities of acquired entity. Only recognise liabilities for restructuring activities when the acquiree has an existing liability at acquisition date. Prohibited from recognising liabilities for further losses or other costs expected to be incurred as a result of the business combinations.	Similar to IFRS, but specific rules for acquired in-process research and development (generally expensed) and contingent liabilities. Some restructuring liabilities relating solely to the acquired entity may be recognised in fair value exercise if specific criteria about restructuring plans are met.
Purchase method – contingent consideration	Include in cost of combination at acquisition date if adjustment is probable and can be measured reliably.	Not recognised until the contingency is resolved or the amount is determinable.
Purchase method – minority interests at acquisition	State at minority's proportion of the net fair value of acquired identifiable assets, liabilities and contingent liabilities.	Generally state at share of pre-acquisition carrying value of net assets.
Purchase method – goodwill and intangible assets with indefinite useful lives	Capitalise but do not amortise. Review goodwill and indefinite-lived intangible assets for impairment at least annually at the cash-generating unit level.	Similar to IFRS; however, impairment measurement model is different.
Purchase method – negative goodwill	Acquirer to reassess the identification and measurement of acquiree's identifiable assets, liabilities and contingent liabilities. Any excess remaining after that reassessment is recognised in income statement immediately.	Reduce proportionately the fair values assigned to non-current assets (with certain exceptions). Any excess is recognised in the income statement immediately as an extraordinary gain.
Purchase method – subsequent adjustments to fair values	Fair values can be adjusted against goodwill within 12 months of the acquisition date. Record subsequent adjustments in income statement unless they are to correct an error.	Similar to IFRS. Once the fair value allocation is finalised, no further changes are permitted except for the resolution of known pre-acquisition contingencies. Record against goodwill the adjustments made during the allocation period relating to data for which management was waiting to complete the allocation.
Purchase method – disclosure	Disclosures include names and descriptions of combining entities, date of acquisition, cost of combination, summary of fair values and pre-acquisition IFRS values of assets and liabilities acquired, and impact on results and financial position of acquirer.	Similar to IFRS, with additional disclosures regarding the reasons for the acquisition and details of allocations.
Uniting of interests method	Prohibited.	Similar to IFRS.

Auditor - Business combinations