1. The Core Recognition Principle
As of the acquisition date, the acquirer must recognize, separately from goodwill, the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree. These components must be measured at their acquisition-date fair values under IFRS 13 and ASC 820.
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2. Unrecorded Intangible Assets and Hidden Liabilities
The acquirer must recognize identifiable intangible assets acquired in a business combination that were not previously recognized by the acquiree (e.g., internally generated brand names, customer lists, patent portfolios, or in-process research and development). These assets are recognized if they meet either:
- The Separability Criterion: The asset is capable of being separated or divided from the acquiree and sold, transferred, licensed, rented, or exchanged.
- The Contractual-Legal Criterion: The asset arises from contractual or other legal rights, regardless of whether those rights are transferable or separable.
3. The 12-Month Measurement Window
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the acquirer reports provisional amounts. The acquirer has a maximum of 12 months from the acquisition date to adjust these provisional amounts to reflect new information obtained about facts and circumstances that existed as of the acquisition date. Any adjustments made within this measurement window adjust goodwill retrospectively.
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