1. Recognition & measurement of net identifiable assets IFRS 3 The revised standard does not contain that probability recognition and thus requires the acquirer to recognise identifiable asset and liabilities regardless of the degree of probability. Fair value of assets/liabilities at acquisition date Future planned cost - no present obligation at acquisition date – no liability as it did not exist on that date - not recognised. Identifiable asset /liabilities must be part of what the acquirer and acquiree exchange. NOT the result of separate transactions. Can include asset / liabilities not previously recognised - Intangible assets - Internally generated assets (brand names) = IDENTIFIABLE Understate liability Understate Goodwill Understate asset Overstate Goodwill

2. Deferred settlement IFRS 3 A Ltd acquired 80% of B Ltd on 1 Jan 20.1 for R1 000 000 508 414 200 000 R Cash + FV of Asset Deferred Amount CONSIDERATION = Fair value AT acquisition date 708 414 Conditions: 20% in: R120 000 immediate in cash + an asset MV = R80 000 : rest settled 1 Jan 20.5 Discount rate = 12 % WHAT IS THE CONDISERATION FV: 1000 000 x 80% = 800 000, PMT= 0, i= 12%, n= 4 Calc PV= 508 414 The difference between R800 000 and R508 414 represents interest to be shown in the SP/LOCI as Finance cost (P/L).

3. GOODWILL NET ASSET / LIABILITIES Id : Asset / Liabilities Goodwill (Bargain purchase) Re assess Subsequent measure - meet according to IFRS 3 usually applicable - can only be changed within 12 months of acquisition - FV OF PREVIOUS HOLDINGS Contingent liabilities Intangible Assets IFRS 3 asset / liabilities contingent liability consideration trf NCI Cash Shares Assets in form of payment NCINCI CONSIDERATION TRF + Deferred payment

4. Non – Controlling Interest IFRS 3 Minority Interest– changed to Non controlling Interest Should be measured at acquisition date Fair Value Proportionate share of the acquiree identifiable net asset & libilities 100 000 share Parent 70%, NCI 30% Net asset = R1 100 000 Share = R12 Paid R1 000 000 DIFFERENCE IN GOODWILL 1 100 000 – 330 000 = 770 000 – 1 000 000 =230 000 (Goodwill) 30% = R330 000 Market price shares or alternative valuation techniques Goodwill calculation: (1 100 000 – 360 000) = 740 000 (1 000 000 - 740 000 = 260 000 (Goodwill) 100 000 x 30% x R12 = R360 000 FV NCI FULL GOODWILL METHOD PARTIAL GOODWILL METHOD

5. Identify the acquirer and account for business combination transaction separately from related transaction Date of acquisition Consideration related to business combination Recognition of identifiable assets and liabilities Initial measurement of fair value of identifiable assets and liabilities IFRS 3: BUSINESS COMBINATIONS - SUMMARY Acquisition method Entity that obtains control is acquirer Separate related transactions and apply other IFRS standards Date on which control of net assets and operations is transferred to the acquirer Use fair value at acquisition date, also for business combination achieved in stages Costs directly attributable not part of business combination Contingent consideration Assets/liabilities recognised separately Basic recognition: Meet definitions in Framework Classifying or designating Exceptions Fair value as at acquisition date Market values or valuation techniques Exceptions

6. Non-controlling interest Goodwill/Gain on bargain purchase Measurement period Disclosure At proportionate (partial) share of net assets, or At fair value (full goodwill method) Consideration transferred + non-controlling interest + FV of previously-held interest at date of acquisition (only step acquisition) – Net assets acquired and measured in terms of IFRS 3 (AC 140) = Goodwill (bargain purchase gain) Goodwill: Recognise as asset, subsequent impairment test (IAS 36) Bargain gain: Reassess all items; if still gain, recognise at acquisition date in profit of loss Limited to one year Provisional values recognised if accounting incomplete Also recognise assets and liabilities that previously were not recognised even though they existed Facts and circumstances existing at acquisition date should be considered Correction of error if it becomes known after measurement period