Conventional Reverse Acquisition

Acquisition
• Issuer of • The issuer of • The issuer of shares is the
shares as shares is the accounting acquiree
consideration accounting
transferred acquirer.
• Reference to • Accounting • Accounting acquirer/ Legal
combining acquirer/ Legal subsidiary
constituents parent • Accounting acquiree/ Legal parent
• Accounting
acquiree/ Legal
subsidiary
• Measurement • Fair value of the • Fair value of the notional number of
of consideration equity instruments that the
consideration transferred by accounting acquirer would have had
transferred the accounting to issue to the accounting acquiree to
acquirer. give the owners of the accounting
acquiree the same percentage
ownership in the combined entity.
 Conventional Reverse Acquisition
Acquisition
• Consolidated financial • In the name of the • In the name of the
statements accounting accounting acquiree with
acquirer which is the disclosure in the notes
also the legal that they are a continuation
parent. of the accounting acquirer’s
financial statements.
• Consolidated assets and • Accounting • Accounting acquirer's assets
liabilities acquirer's assets and liabilities at carrying
and liabilities at amounts plus accounting
carrying amounts acquiree’s asset and
plus accounting liabilities adjusted for FVAs.
acquiree’s asset
and liabilities
adjusted for FVAs.
• Consolidated retained • The accounting • The accounting acquirer
earnings and other acquirer only. only.
equity balances
 Conventional acquisition
• Consolidated • The equity instruments of
equity the accounting acquirer.
instrument
• Non- • Arises if accounting acquirer
controlling acquires less than 100%
interest interest in the accounting
acquiree.
• Measured at the NCI’s
proportionate share of
accounting acquiree’s net
assets or at fair value.
Reverse Acquisition
The issued equity instruments
of the accounting acquirer
outstanding before the
business combination plus the
fair value of the consideration
effectively transferred.
• Arises if not all of the
accounting acquirer’s shares
are exchanged for the
accounting acquiree’s
shares.
• NCI’s proportionate share of
accounting acquirer’s net
assets at pre-combination
carrying amounts. No fair
value option.
Special Purpose Entities
 Or special purpose vehicle is a legal entity created by a
sponsor to accomplish a narrow and well-defined objective
for the sponsor.
 SPE’s are created to isolate the sponsor from financial risk.
 Normally, the sponsor frequently transfers asset to the SPE,
obtains right to use the asset held by the SPE or performs
services for the SPE, while other parties may provide the
funding to the SPE.
 An entity that engages in transactions with an SPE may in a
substance control the SPE.
 The sponsor shall use PFRS 10 in assessing the existence of
control and performing consolidation procedures.