This free, guided checker walks your finance team through the key decision points for IFRS 3 and IAS 38 Identifiable Intangible Assets in PPA. Answer a few questions to see the likely treatment and the evidence to document.
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This tool is a high-level IFRS screening aid for general information only and is not accounting, audit or legal advice. Conclusions require entity-specific evidence and judgement - confirm the treatment with your advisor.
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Identifiable intangible asset recognition in PPA applies only when IFRS 3 scope is met and the acquirer obtains control of a business. A business requires inputs and substantive processes that together contribute to creating outputs (IFRS 3.B7), and the optional concentration test in IFRS 3.B7A can short-cut the analysis. The classification matters: asset acquisitions recognise no goodwill and follow different deferred tax and contingent consideration rules.
Account for an asset acquisition: allocate the cost of the group to the individual identifiable assets and liabilities on a relative fair value basis (IFRS 3.2(b); IAS 38.27), with no goodwill and no day-one deferred tax under the IAS 12.15 initial recognition exemption.
Official guidance: IFRS issued standards
PPA requires proactive identification of intangibles such as customer relationships, technology, brands, order backlog, non-compete agreements, and licenses even when the acquiree did not recognize them.
Complete the intangible identification checklist before finalizing the PPA; IFRS 3.10 and B31 require identifiable intangibles to be recognised separately from goodwill.
Official guidance: IFRS issued standards
Separable intangibles can be sold, transferred, licensed, or exchanged; contractual rights include patents, trademarks, customer contracts, and franchise agreements enforceable at acquisition date.
Exclude non-qualifying items from separate recognition; value that is neither separable nor contractual-legal, such as an assembled workforce, is subsumed into goodwill (IFRS 3.B37).
Official guidance: IFRS issued standards
Common PPA intangibles include customer lists, developed technology, in-process R&D, trade names, and backlog; failure to identify them overstates goodwill.
Perform a targeted assessment and valuation of the common PPA intangible categories before goodwill is struck (IFRS 3.B31).
Official guidance: IFRS issued standards
Fair value at acquisition date reflects market participant assumptions about future cash flows, attrition, obsolescence, and contributory asset charges.
Obtain valuation specialist support so each material intangible is measured at acquisition-date fair value under IFRS 3.18 and IFRS 13 before the PPA is finalized.
Official guidance: IFRS issued standards
Finite-life intangibles are amortized over expected benefit period; indefinite-life intangibles such as certain brands require annual impairment testing under IAS 36 rather than amortization.
Assign finite or indefinite useful lives and amortization methods under IAS 38.88-90 before post-acquisition accounting begins.
Official guidance: IFRS issued standards
Goodwill equals consideration plus NCI minus net identifiable assets; incomplete intangible identification inflates goodwill and impairs subsequent IAS 36 testing quality.
Reperform the PPA so all identifiable intangibles are recognised before computing the goodwill residual (IFRS 3.32); a negative residual triggers the IFRS 3.36 reassessment and bargain-purchase gain.
Official guidance: IFRS issued standards
Temporary differences from fair value adjustments create deferred tax liabilities or assets that adjust goodwill at acquisition date under IFRS 3.24 and IAS 12 interaction.
Recognise deferred tax on the intangible fair value uplifts with the offset to goodwill before PPA sign-off (IFRS 3.24; IAS 12.19).
Official guidance: IFRS issued standards
Set amortization commences from acquisition date for finite-life intangibles; indefinite-life assets require IAS 36 annual impairment testing and reassessment of indefinite classification.
Configure subledger amortization from the availability-for-use date (IAS 38.97) and annual impairment testing for indefinite-life assets (IAS 36.10(a)).
Official guidance: IFRS issued standards
IFRS 3.B64 requires disclosure of acquisition-date fair values by major class including intangible assets separately from goodwill.
Complete the IFRS 3.B64(i) disclosure tables of acquisition-date amounts for each major class, presenting intangibles separately from goodwill.
Official guidance: IFRS issued standards
Provisional intangible valuations may be adjusted during the twelve-month measurement period when new acquisition-date information becomes available, with goodwill offset.
Track provisional intangible valuations in a measurement-period log and disclose the items still provisional and why (IFRS 3.45; IFRS 3.B67(a)).
Official guidance: IFRS issued standards
Document the primary driver of acquired intangible value for disclosure emphasis and subsequent monitoring. The dominant category usually determines the lead valuation method - multi-period excess earnings for customer relationships, relief-from-royalty for brands and technology - and only one asset should normally carry the excess-earnings method to avoid double counting cash flows.
Emphasize customer attrition and renewal assumptions in the IFRS 3.B64 disclosures and in subsequent IAS 36 impairment monitoring. Emphasize technology obsolescence, remaining useful life, and R&D assumptions in the IFRS 3.B64 disclosures. Emphasize the royalty rate benchmark and the IAS 38.88 indefinite-life assessment in the IFRS 3.B64 disclosures.
Official guidance: IFRS issued standards
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