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Hi

Does anyone have disclosure examples where there was a common control transaction for the year?

The company formed a Newco which holds all the subsidiaries previously held by Holdco. IFRS 3 will not be applied to the consolidated financial statements of Newco as Holdco is still the ultimate shareholder.

Thanks

Hi,
are you looking for disclosures in consolidated financial statements of Holdco group or separate f.s. of Newco?

Disclosures in the consolidated financial statements of Newco.

The company elected to prepare consolidated financial statements of Newco as there are other shareholders of Newco

I see, a tough one I can't give you any actual examples and I don't expect you could find many. I think you should just explain your accounting approach in detail without strictly following any template. What was your accounting approach? I.e. recognition of assets and liabilities and fair value or some other?

Is Newco a public entity?

Yes I struggled to find examples as the company is applying the pooling of interest (Book value method) and not acquisition accounting as the substance of the transaction did not change the shareholding of the ultimate parent entity.

I will most probably only include in the accounting policies and a note to the financial statements the method applied and the reasons thereof.

Newco is not a public company.

I agree this is the best approach. There is no need to spend lots of time on disclosures if Newco is not a public company

I thought that the "pooling of interest" method is not allowed under the current IFRS3 standard. Have I missed something?

Wynand Brits wrote: ↑25 Feb 2020, 09:56 The company formed a Newco which holds all the subsidiaries previously held by Holdco. IFRS 3 will not be applied to the consolidated financial statements of Newco as Holdco is still the ultimate shareholder.

So you've missed the fact that IFRS 3 does not apply here

Thank you Marek. That was what I´ve missed indeed

The IASB are discussing a new standard on this topic.

Where there is no change in control or the fundamental activity of the group before and after, in effect you can just ignore the reorganisation and present all periods as though the newco at the top going in didn't happen.

I'm not sure if you noticed that Wynand Brits wrote that the ultimate parent ('Holdco') will remain the same and he asks about consolidated FS of Newco. In this case, how would you present comparative periods in consolidated FS of Newco?

We have had exactly this scenario recently and as you say IFRS doesn't specify so you go by the IFRS rules in this case:

- consider similar transactions - does not really apply here
- consider the conceptual framework , including other accounting standards

So the most relevant and reliable accounting reflecting the substance of the transaction is that nothing has changed.

So we present the new consol group as though nothing had happened (ie the group accounts with comparative info as normal, but the 'parent only' single financial statements is of course from incorporation onwards.

Any cost of issuing the new shares in former topco goes to equity.

Well, I'm not so sure that nothing happened, as the Newco is partially owned by non-controlling interest, so this is not just a reorganisation within one group

@Wynand Brits - how do plan to present comparative data in Newco's consolidated FS?

We are only worried about NCI where it is in a subsidiary -we don't worry about having different shareholders at NewCo level in the NewCo financial reporting?

Of course you're right

PS I've just read in the IASB February update that the IASB is ready to prepare a discussion paper on business combinations under common control so we may see some interesting insights soon

During the year ended 31 March 2018, XXX LTD which was previously held jointly by AAA LTD and BBB LTD was transferred at no consideration to FBT LTD. The group has assessed that the transfer of XXX LTD to FBT LTD is a business combination under common control as there has been no change in ultimate shareholding following the transfer on XX April 2019 and as the Group restructuring was a reorganisation devoid of commercial implications. Hence, the group has applied the pooling of interests method for accounting of this business combination under common control.

Under the pooling of interests method, the assets and liabilities of the combined entity are reflected at their carrying amounts and the difference between the consideration transferred and the acquired net assets is reflected within equity.

Marek Muc wrote: ↑03 Mar 2020, 11:31 PS I've just read in the IASB February update that the IASB is ready to prepare a discussion paper on business combinations under common control so we may see some interesting insights soon

Did we see anything further on this?

I'm still waiting to see more regarding variable consideration on acquisition of fixed/intangible assets - the last I saw was years ago when it was decided it was too big a question to answer in an Agenda Decision... then nothing more. Full rewrite of IAS 38 please! (PS I know there's an ongoing consultation about IFRS 3 /goodwill, but unrelated perhaps, though any decisions about goodwill might affect IAS 38 later....)

KR

They postponed the DP for September 2020 due to ... you know what

I'm not sure whether the variable consideration issue is in the pipeline, the project page does not look promising ...
https://www.ifrs.org/projects/work-plan ... rent-stage

have you read this section? would you add something or do you have any comments based on your experience?
https://ifrscommunity.com/knowledge-bas ... sideration

I've encountered the issue twice. In one case the question was about the treatment of subsequent change to the variable consideration (non- business combination scenario). In this case it was credited to P&L.

In another scenario the question was whether it was correct to recognise at all, and if it was, it would be an adjustment to the asset carrying value.

So this is why the (new?) standard will be helpful.

My view is that the movement should be P&L with disclosure of why the initial estimate was incorrect, if material, as there's a risk here of overstating the contingent payment with the objective of releasing a P&L credit later.

thanks for sharing, nice summary that they prepared, but it's too early stage to get attached to their preliminary views...

As common control transactions are not covered under IFRS 3 (infact under any IFRS) so technically there are no disclosure requirement for these transactions.

IAS 1.17c:

A fair presentation also requires an entity to provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial performance

similar wording in IAS 1.31

And don't forget IAS 8 Para 10:

In the absence of an IFRS that specifically applies to a transaction, other event or condition, management shall use its judgement in developing and applying an accounting policy that results in information that is:

1. relevant to the economic decision‑making needs of users; and
2. reliable, in that the financial statements:
a. represent faithfully the financial position, financial performance and cash flows of the entity;
b. reflect the economic substance of transactions, other events and conditions, and not merely the legal form;
c. are neutral, ie free from bias;
d. are prudent; and
e. are complete in all material respects