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IFRS for SMEs 3rd Edition Series Session 9 – Groups, Goodwill & Investments Demystified

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Overview

This webinar focuses on group reporting under the IFRS for SMEs Accounting Standard, covering the key requirements for consolidations, business combinations, goodwill and investments. The session will address the practical application of Sections 9, 14, 15 and 19, with particular emphasis on the changes introduced by the 3rd Edition and the key differences between IFRS for SMEs and full IFRS. 

Join Caryn Maitland CA(SA) as she unpacks the complexities of group reporting, including determining control, preparing consolidated financial statements, accounting for business combinations and goodwill and accounting for investments in associates and joint arrangements. The session will also explore practical group reporting considerations, including non-controlling interests, intra-group eliminations and deferred tax consequences, equipping delegates to make and document key judgements and prepare and review group financial statements with greater confidence. 

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Learning objectives

Attending this webinar will equip you with the following skills:  

• Determine whether control exists under Section 9 of the IFRS for SMEs Accounting Standard, including applying the elements of control and identifying the exemptions from presenting consolidated financial statements. 
• Prepare consolidated financial statements, including applying uniform accounting policies and reporting dates, eliminating intra-group balances, transactions and unrealised profits and measuring and presenting non-controlling interests. 
• Account for business combinations using the acquisition method under Section 19, including identifying the acquirer, determining the acquisition date, measuring consideration and identifiable net assets at fair value and recognising related deferred tax. 
• Recognise, amortise and assess goodwill for impairment, including accounting for bargain purchases, acquisition-related costs and the changes introduced by the IFRS for SMEs 3rd Edition. 
• Account for investments in associates and joint arrangements under Sections 14 and 15, including determining significant influence and joint control, classifying joint arrangements and applying the cost model, equity method or fair value model consistently. 

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Content

The webinar will cover the following topics:  

1. Subsidiaries and Consolidation Principles 

• IFRS for SMEs Accounting Standard: Section 9 – Consolidated and Separate Financial Statements 
• Definition of control: 
• Power 
• Exposure or rights to variable returns 
• Ability to use power to affect returns 
• Identification of subsidiaries 
• Requirement to present consolidated financial statements 
• Exemptions from consolidation 
• Consolidation procedures 
• Uniform accounting policies and reporting dates 
• Elimination of intra-group balances, transactions, income, expenses and dividends 
• Elimination of unrealised intra-group profits in inventory and property, plant and equipment 
• Deferred tax on consolidation adjustments 
• Non-controlling interests: 
• Measurement 
• Presentation 
• Allocation of profit or loss and total comprehensive income 
• Changes in ownership interests without loss of control 
• Loss of control 
• Separate financial statements: 
• Cost model 
• Equity method 
• Fair value model 
• Combined financial statements 

2. Business Combinations and Goodwill 

• IFRS for SMEs Accounting Standard: Section 19 – Business Combinations and Goodwill 
• Definition of a business 
• Business combinations versus asset acquisitions 
• Acquisition method 
• Identifying the acquirer 
• Determining the acquisition date 
• Consideration transferred, including contingent consideration 
• Acquisition-related costs 
• Recognition and measurement of identifiable assets acquired and liabilities assumed at fair value 
• Contingent liabilities assumed in a business combination 
• Deferred tax arising in a business combination 
• Goodwill: 
• Initial recognition 
• Amortisation 
• Useful life 
• 10-year presumption 
• Impairment of goodwill under Section 27 
• Bargain purchases and reassessment 
• Business combinations achieved in stages 
• Measurement period adjustments 
• Changes introduced by the IFRS for SMEs 3rd Edition 

3. Investments in Associates and Joint Ventures 

• IFRS for SMEs Accounting Standard: Section 14 – Investments in Associates 
• Significant influence and the 20% presumption 
• Accounting policy choice: 
• Cost model 
• Equity method 
• Fair value model 
• Equity method: 
• Implicit goodwill 
• Share of profit or loss 
• Distributions 
• Unrealised profits 
• Losses in excess of the investment 
• Impairment 
• Discontinuing the equity method 
• IFRS for SMEs Accounting Standard: Section 15 – Joint Arrangements 
• Joint control 
• Classification of joint arrangements: 
• Joint operations 
• Joint ventures 
• Accounting for joint operations 
• Accounting for joint ventures 

4. Group Reporting under IFRS for SMEs 

• Group structures and determining the reporting entity 
• Intra-group loans and financing arrangements 
• Related party disclosures under Section 33 in a group context 
• South African tax considerations in a group context: 
• Taxation per legal entity 
• No tax consolidation 
• Companies Act 71 of 2008 requirements for group and separate annual financial statements 
• Key differences from full IFRS: 
• IFRS 3 
• IFRS 10 
• IFRS 11 
• IAS 28 
• Common group reporting errors and review findings 

5. Practical Application and Key Judgements 

• Determining control, significant influence and joint control 
• Applying consolidation requirements in practice 
• Identifying and accounting for business combinations 
• Applying the acquisition method 
• Accounting for goodwill and impairment 
• Applying accounting policy choices for associates and joint ventures 
• Identifying and correcting common group reporting errors 
• Deferred tax implications of consolidation and fair value adjustments 
• Preparing and reviewing compliant and defensible group financial statements