In this episode 🎙️, we enter the high-stakes world of M&A and group reporting 🏢📊.

We break down the Control Model under IFRS 10 and the acquisition mechanics under IFRS 3.

Because consolidation isn’t about ownership percentage.

It’s about power.

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Key subjects covered in this episode:

• Defining Control 🎯

Under IFRS 10, control exists when three elements are present:

1️⃣ Power over the investee

2️⃣ Exposure (or rights) to variable returns

3️⃣ Ability to use power to affect those returns

Owning >50% usually means control — but not always.

Owning <50% can still mean control if power exists.

Substance over shareholding percentage.

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• The Acquisition Method 🧾

IFRS 3 requires four steps:

1️⃣ Identify the acquirer

2️⃣ Determine the acquisition date

3️⃣ Recognize and measure identifiable assets and liabilities at fair value

4️⃣ Recognize goodwill (or bargain purchase gain)

Fair value rules the acquisition date.

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• Goodwill Calculation 📈

Goodwill =

Consideration transferred

• NCI

• Fair value of previously held interest (if step acquisition)

− Fair value of identifiable net assets acquired

Two approaches:

🔹 Full Goodwill Method → NCI measured at fair value

🔹 Partial Goodwill Method → NCI measured at proportionate share of net assets

Choice affects the goodwill amount — and future impairment risk.

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• Non-Controlling Interest (NCI) 👥

NCI represents the equity in a subsidiary not attributable to the parent.

Measurement options at acquisition:

✔️ Fair Value (Full Goodwill)

✔️ Proportionate share of identifiable net assets (Partial Goodwill)

Post-acquisition profit is split between parent and NCI.

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• Intra-group Eliminations 🔄

To present the group as a single economic entity:

❌ Eliminate intercompany sales

❌ Eliminate intercompany balances

❌ Remove unrealized profit in inventory

Internal transactions must disappear.

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• Bargain Purchases 💰

If purchase consideration < fair value of identifiable net assets:

👉 Recognize a Gain on Bargain Purchase in Profit or Loss.

But only after reassessing measurements carefully.

IFRS assumes undervaluation is rare.

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• Post-Acquisition Adjustments ⚙️

Fair value adjustments create:

✔️ Extra depreciation

✔️ Adjusted profit splits

✔️ Ongoing elimination of unrealized profits

Consolidation is not a one-day calculation. It continues every reporting period.

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🔥 A Pro-Tip for your SOCPA Prep

Control is not about percentage — it’s about power.

And in goodwill calculations:

Always compute identifiable net assets at fair value first.

Then calculate goodwill as the balancing figure.

Examiners often hide a fair value adjustment (like undervalued land 🏗️).

If you miss that, your goodwill will be wrong — and every subsequent impairment test will also be wrong.

In consolidation, one small misclassification spreads through the entire group.

Precision is everything.