Page 252 - Microsoft Word - 00 CIMA F1 Prelims STUDENT 2018.docx

Chapter 13

1.2 Fair value of consideration paid

Fair value is defined as ‘the price that would be received to sell an
asset or paid to transfer a liability in an ORDERLY
TRANSACTION between market participants.’ (IFRS 13 para 9)

Different methods of paying for a subsidiary may be used. IFRS 3
outlines what should be considered as the FV for each method of
payment.

Method of Payment FV (per IFRS 3) Journal

Cash paid Dr GW
Cash
(upfront)
Cr Cash

Present value (PV) Dr GW
Deferred
cash
Cr Liability

Dr GW
Shares Market value (MV) at
(upfront) acquisition Cr Share capital & share
premium

Dr GW
Deferred MV at acquisition
shares
Cr Shares to be issued

Dr GW
Contingent
consideration FV (given in calculation) Cr Liability

244