Investor Presentaiton
Appendix C
Recent IFRIC agenda decisions
Meeting date
September
2022
Issue discussed by the Committee
Special purpose acquisition
companies ("SPAC"): Accounting for
warrants at acquisition:
How does an entity account for
warrants on acquiring a SPAC?
Summary of the Committee's conclusion on the issue
In the fact pattern described, the acquisition of the SPAC is the acquisition of
a group of assets that does not constitute a business. Therefore, the entity
identifies and recognises the individual identifiable assets acquired and
liabilities assumed as part of the acquisition.
In assessing whether it assumes the SPAC warrants as part of the
acquisition, the entity considers the specific facts and circumstances of the
transaction, including the terms and conditions of all agreements associated
with the acquisition, and might conclude:
(a) the entity assumes the SPAC warrants as part of the acquisition -
in this case, the entity issues ordinary shares to acquire the SPAC
and then issues new warrants to replace the SPAC warrants it has
assumed.
In the fact pattern described, the SPAC's founder shareholders and
public investors hold the SPAC warrants solely in their capacity as
owners of the SPAC. Therefore the entity applies IAS 32 to
determine whether the SPAC warrants are financial liabilities or
equity instruments.
The entity then applies IAS 32 and IFRS 9 to account for the
replacement of the SPAC warrants with new warrants. However,
because the entity negotiated the replacement of the SPAC
warrants as part of the SPAC acquisition, it determines whether -
and to what extent - it accounts for new warrants it issues as part
of that acquisition. As no IFRS specifically applies in making this
determination, the entity applies paragraphs 10-11 of IAS 8 in
developing and applying an accounting policy that results in
information that is relevant and reliable.
(b) the entity does not assume the SPAC warrants as part of the
acquisition - in this case, the entity issues both ordinary shares
and new warrants to acquire the SPAC.
In the fact pattern described, the SPAC's stock exchange listing does not
meet the definition of an intangible asset because it is not identifiable, and
the fair value of the instruments the entity issues to acquire the SPAC
exceeds the fair value of the identifiable net assets acquired.
Therefore, in applying paragraphs 2 and 13A of IFRS 2, the Committee
concluded that the entity receives a stock exchange listing service for which
it has issued equity instruments as part of a share-based payment
transaction, and measures this service received as the difference between
the fair values of the instruments issued to acquire the SPAC and identifiable
net assets acquired.
For the instruments issued, the Committee concluded that the entity
applies:
(a) IFRS 2 in accounting for instruments issued to acquire the stock
exchange listing service; and
(b) IAS 32 in accounting for instruments issued to acquire cash and
assume any liability related to the SPAC warrants.
(to be continued)
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