The name is absent

Goodwill represents the excess cost of business combination over the fair value
of the net identifiable assets, liabilities and contingent liabilities.

The cost of business combination is the sum of fair values on the exchange, of
assets transferred, of existing or contingent liabilities and the equity instruments issued
by the acquirer and any costs directly attributable to the combination of enterprises.

Goodwill = Cost of business combination - Fair value of identifiable assets,
liabilities and contingent liabilities acquired

Regarding the goodwill recognition and initial measurement, IFRS 3 requires
that, at the acquisition date, the acquirer:

(a) should recognize goodwill acquired in business combination as an asset, and

(b) should assess goodwill at its cost, being the excess cost of the business
combination over the acquirer interest in the fair value of net identifiable assets, debts
and contingent liabilities.

The motivation underlying the recognition of goodwill acquired in a business
combination as intangible asset is that it represents an advance payment by the
purchaser to generate future economic benefits of assets that can not be individually
identified and separately recognized.

Example 1: Initial measurement of goodwill based on IFRS 3 (2004)

At acquisition date ABC Company holds:

- Identifiable tangible assets (fair value)           $310,000 mil

- Identifiable intangible assets (fair value)           $60,000 mil

- Identifiable liabilities (fair value)                 $180,000 mil

XYZ Company acquires 80% of the shares of the subsidiary for $200,000 mil.

Recognizing goodwill based on partial goodwill method:

$ Mil

■ The fair value of the assets                       370,000

(-) The fair value of the liabilities(180,000)
= Identifiable net assets (fair value)                190,000

(-) Minority interest (20% × 190,000)(38,000)
= Net Assets acquired                           152,000

Goodwill on acquisition = 200.000 - 152,000 = $48,000 mil

Initial recognition and measurement of goodwill based on IFRS 3 (Revised)

The above summarizes the current requirements of IFRS 3, concerning goodwill
recognizing and initial measurement. But, a new standard - IFRS 3 (Revised) - has
been published in January 2008 and comes into effect from July 2009. IFRS 3 was
revised in a joint project between the IASB and FASB, aiming at taking a broader view
at business combination accounting and at unifying the accounting treatment at a
worldwide level. So, the IASB and the FASB agree to work together and to pool their
resources as both Boards considered that it was the most effective method to eliminate
as many as possible of the differences between IFRS and US GAAP.

One of the main changes regards “non-controlling interests” (NCI), term used in
IFRS 3 (R) instead of “minority interests”, this being the remaining equity interests
which appears in a business combination when the acquirer achieves control without
buying all of the equity of the acquiree.

The revised standard gives entities the option, on a transaction-by-transaction
basis, to measure non-controlling interests either at the fair value of their proportion of
identifiable assets and liabilities, or at full fair value. The first method will result in
measurement of goodwill, which is basically the same as with the existing IFRS. The
second method will record goodwill on the non-controlling interest as well as on the

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