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Dear Sir
Under 37 Restructuring provisions
Restructuring provision on acquisition: recognise a provision only if there is an obligation at acquisition dateQuestion: what would be the situation that would recognize a restructuring provision on acquisition?
Will plan to restructure a subsidiary following an acquisition fall in this standard?
Thanks
Hi,
You need to distinguish here between IS 37 and IFRS 3.
IFRS 3 deals with the fair value of the subsidiary’s net assets at acquisition and it states that they should be measured at fair value. Therefore if at the acquisition date the restructuring is held as a contingent liability in the subsidiary’s accounts (doubtful) then we can measure it at fair value in the group accounts but not within the individual accounts. However, I consider this to be very doubtful to happen as if the restructuring provision is not recognised then it won’t be disclosed either.
In the individual accounts we use IAS 37 where there needs to be an obligation and the plan either communicated to those impacted or communicated to them.
Thanks
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