HANDOUT 5 Page 1 of 2 (US 301) MINI-EXERCISE 3: BUSINESS COMBINATIONS This handout should be used in conjunction with Guide 3.

Determination of Non Controlling Interest (previously Minority Interest) Under revised IFRS (effective 1 July 2009), if an investor acquires less than 100% of a subsidiary, the investor may select one of the following options: a. The non controlling interest is stated at the minority's proportionate share of the acquirees identifiable net assets at acquisition date (effectively the treatment before the revision to IFRS 3); or b. The non controlling interest is stated at fair value.
Revised Treatment IFRS only NCI Based on Net Assets IFRS & US GAAP NCI Based on Fair Value

Fair Value of Consideration Transferred

1,100

1,100

Amount of Non-Controlling Interest (NCI)

200 (20% x 1,000) 1,300

250

1,350 1,000

Net Identifiable Assets Acquired

1,000

Goodwill

300

350

Consolidated Net Assets

1,300

1,350

Note that under revised US GAAP (effective 15 December 2008) the non controlling interest is measured at fair value at acquisition date. Therefore, the measurement of non controlling interest at fair value under IFRS 3 (option (b) above) is also the US GAAP presentation and therefore will not give rise to a US GAAP difference.

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