Full goodwill and Partial goodwill: IFRS

If Acquirer decides to purchase only 80% of Target, under IFRS they will have the option to:

A. report the acquisition as either a business combination or as an acquisition.
B. value the identifiable assets and liabilities of Target at their current book values or at fair market value.
C. report more or less goodwill depending on the accounting method they choose.

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Answer: C

• All business combinations (e.g., merger, purchase, or consolidation) are reported under the acquisition method.
• Identifiable assets and liabilities must be reported at fair value at the time of the acquisition.
• Under IFRS, Acquirer has the option of calculating the goodwill for the acquisition under either the full goodwill or partial goodwill methods. Goodwill is less under the partial goodwill method.