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I have a question regarding the purchase of shares, let’s say they give 80% of ownership in another entity.
Shares are usually classified as Financial Instruments Available for Sale, therefore the initial measurement is cost plus transaction costs directly attributable.
These same shares represent an ownership and according to IFRS 3 Business Combinations, all acquisition costs, even those directly related to the acquisition, such as professional fees must be expensed.
Is this not contradictory? Where am I going wrong interpreting the rules?
Hi,
Don’t get too confused between the two for the exam. If you have a question on groups that is asking you to calculate goodwill or anything related then the fees are expensed.
If you are looking at the purchase of shares as part of a financial asset then follow the rules on financial instruments.
Thanks
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