Transitional provisions for business comTransitional provisions for business combinations involving only mutual entities or by contract alone (application of paragraph 66)

Transitional provisions for business combinations involving only mutual entities or by contract alone (application of paragraph 66)

B68 Paragraph Aus1.2 provides that this Standard applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July 2009. Earlier application is permitted. However, an entity shall apply this Standard only at the beginning of an annual reporting period that begins on or after 30 June 2007. If an entity applies this Standard before its effective date, the entity shall disclose that fact and shall apply AASB 127 (as amended in March 2008) at the same time.

B69 The requirement to apply this Standard prospectively has the following effect for a business combination involving only mutual entities or by contract alone if the acquisition date for that business combination is before the application of this Standard:

(a) Classification – An entity shall continue to classify the prior business combination in accordance with the entity’s previous accounting policies for such combinations.

(b) Previously recognised goodwill – At the beginning of the first annual period in which this Standard is applied, the carrying amount of goodwill arising from the prior business combination shall be its carrying amount at that date in accordance with the entity’s previous accounting policies. In determining that amount, the entity shall eliminate the carrying amount of any accumulated amortisation of that goodwill and the corresponding decrease in goodwill. No other adjustments shall be made to the carrying amount of goodwill.

(c) Goodwill previously recognised as a deduction from equity – The entity’s previous accounting policies may have resulted in goodwill arising from the prior business combination being recognised as a deduction from equity. In that situation the entity shall not recognise that goodwill as an asset at the beginning of the first annual period in which this Standard is applied. Furthermore, the entity shall not recognise in profit or loss any part of that goodwill when it disposes of all or part of the business to which that goodwill relates or when a cash-generating unit to which the goodwill relates becomes impaired.

(d) Subsequent accounting for goodwill – From the beginning of the first annual period in which this Standard is applied, an entity shall discontinue amortising goodwill arising from the prior business combination and shall test goodwill for impairment in accordance with AASB 136.

(e) Previously recognised negative goodwill – An entity that accounted for the prior business combination by applying the purchase method may have recognised a deferred credit for an excess of its interest in the net fair value of the acquiree’s identifiable assets and liabilities over the cost of that interest (sometimes called negative goodwill). If so, the entity shall derecognise the carrying amount of that deferred credit at the beginning of the first annual period in which this Standard is applied with a corresponding adjustment to the opening balance of retained earnings at that date.