IFRS 3 outlines the accounting treatment following a business combination, which originally referred to bother mergers of equals as well as acquisitions, however since revisions in 2008, one entity must be deemed the acquirer.
Intangible asset treatment in IFRS 3
Prior to IFRS 3, intangible assets had been referred to simply as Goodwill. The need to identify all assets gave rise to five intangible asset classes with Goodwill now as a balancing figure. The five classes are as follows:
- Artistic-related intangible assets
- Marketing-related intangible assets
- Technology-based intangible assets
- Customer-related intangible assets
- Contract-based intangible assets
Brand value sits within the marketing-related intangible assets.
Areas not covered in IFRS 3
IFRS 3 does not apply to the formation of a joint venture, combinations of entities or businesses under common control. The IASB added to its agenda a separate agenda project on Common Control Transactions in December 2007. Also, IFRS 3 does not apply to the acquisition of an asset or a group of assets that do not constitute a business.
