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Goodwill or gains from a bargain purchase arising from a combination are calculated as the
difference between the acquisition-date fair value of the assets acquired and liabilities
assumed and the cost of the business combination at the acquisition date.
The cost of a business combination is the aggregate of:
-
The acquisition-date fair value of the assets acquired, the liabilities assumed and the
equity instruments issued.
-
The fair value of any contingent consideration that depends on future events or on the
fulfilment of certain specified conditions.
The costs incurred to issue equity or debt securities given up in exchange for the items
acquired are not included in the cost of a business combination.
Also, since 1 January 2010 the cost of a business combination does not include the fees paid
to legal advisers and other professionals involved in the combination or, clearly, any costs
incurred internally in this connection. Such amounts are charged directly to profit or loss.
If, exceptionally, a gain from a bargain purchase arises from the business combination, it is
recognised as income in the income statement.
When the fair value of intangible assets cannot be determined by reference to an active
market, Recognition and Measurement Standard no.19 of the Spanish National Chart of
Accounts, as drafted by Royal Decree 1159/2010, limits the recognition thereof up to the
amount in which the value of the net assets acquired is equal to the cost of the business
combination.
If the initial accounting for a business combination is incomplete by the end of the reporting
period in which the combination occurs, the acquirer shall report in its financial statements
provisional amounts for the items for which the accounting is incomplete, and the provisional
amounts may be adjusted in the period required to obtain the necessary information.
However, the measurement period shall not exceed one year from the acquisition date. The
effects of the adjustments made in that period are recognised retrospectively and comparative
information for prior periods must be revised as needed.
Subsequent changes in the fair value of the contingent consideration are recognised in profit
or loss, unless the consideration has been classified as equity, in which case subsequent
changes in its fair value are not recognised.
4.13 Related party transactions
The Company performs all its transactions with related parties on an arm's length basis. Also,
the transfer prices are adequately supported and, therefore, the Company's directors consider
that there are no material risks in this connection that might give rise to significant liabilities in
the future.
4.14 Non-current assets and disposal groups classified as held for sale
The Company classifies a non-current asset or disposal group as held for sale when the
decision to sell it has been taken and the sale is expected to occur within twelve months.
These assets or disposal groups are measured at the lower of their carrying amount and fair
value less costs to sell.
Non-current assets classified as held for sale are not depreciated, but rather at the end of each
reporting period the related valuation adjustments are made to ensure that the carrying
amount is not higher than fair value less costs to sell.