Accounting Valuations

Complying with International Accounting Standards ( IAS) and International Financial Reporting Standards (IFRS) can be costly, both in time and money. For companies considering mergers and acquistions, the new international accounting standards make the process more complicated than ever.

Written in complex language, the new standards are a radical change and most companies now require independent specialists to assist them to withstand the market scrutiny that these new standards impose – greater transparency, the need for objectivity and auditor independence.

Evans & Evans provides acquisition valuations and impairment testing to aid companies in complying with these new standards. We can help you in the following areas:

Purchase Price Allocation

For companies involved in an acquisition, the acquiring company must now:

  • Recognize the acquired business at its fair value at the acquisition date. This is a change from recording the transaction at cost.
  • Determine fair value of the individual assets acquired and liabilities assumed, and then record all such values on the balance sheet at the acquisition date. Previously, some items included as part of the acquisition were not allowed to be recorded.

Testing Goodwill Impairment

Under these new rules, goodwill remains on the balance sheet but must be tested at least annually for impairment in a two-step process.

  • Step 1 compares the fair value of a reporting unit with its carrying amount, including goodwill. If the carrying value exceeds fair value, the reporting unit fails the Step 1 test and must conduct a second test (Step 2). Otherwise there is no impairment.
  • Step 2 compares the implied fair value of goodwill with its carrying amount. If the carrying amount exceeds the implied fair value, an impairment loss must be recognized in the amount of that excess.

Share-based Payment Transactions

IFRS now requires a company to reflect in its profit or loss and financial position the effects of share-based payment transactions, including expenses associated with transactions in which share options are granted to employees.