Investor Presentaiton
HKAS 1.51(a)
HKAS 1.49
HKAS 24.9, BC
51
HK Listco Ltd
Financial statements for the year ended 31 December 2023
(ee) Asset acquisition
Groups of assets acquired and liabilities assumed are assessed to determine if they are business or
asset acquisitions. On an acquisition-by-acquisition basis, the group chooses to apply a simplified
assessment of whether an acquired set of activities and assets is an asset rather than business
acquisition, when substantially all of the fair value of the gross assets acquired is concentrated in a
single identifiable asset or group of similar identifiable assets.
When a group of assets acquired and liabilities assumed do not constitute a business, the overall
acquisition cost is allocated to the individual identifiable assets and liabilities based on their relative
fair values at the date of acquisition. An exception is when the sum of the individual fair values of the
identifiable assets and liabilities differs from the overall acquisition cost. In such case, any identifiable
assets and liabilities that are initially measured at an amount other than cost in accordance with the
group's policies are measured accordingly, and the residual acquisition cost is allocated to the
remaining identifiable assets and liabilities based on their relative fair values at the date of
acquisition 109
(ff) Related parties 110
(a) A person, or a close member of that person's family, is related to the group if that person:
(i)
has control or joint control over the group;
(ii)
has significant influence over the group; or
(iii) is a member of the key management personnel of the group or the group's parent.
(b) An entity is related to the group if any of the following conditions applies:
(i)
The entity and the group are members of the same group (which means that each parent,
subsidiary and fellow subsidiary is related to the others).
(ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture
of a member of a group of which the other entity is a member).
(iii)
Both entities are joint ventures of the same third party.
(iv)
One entity is a joint venture of a third entity and the other entity is an associate of the third
entity.
109 Paragraph 2(b) of HKFRS 3 requires an entity to allocate the cost of the acquisition to the individual identifiable assets and liabilities
based on their relative fair values at the date of acquisition. However, it does not give specific guidance on how to account for asset
acquisition when the sum of the individual fair values of the identifiable assets and liabilities differs from the transaction price and the
group includes identifiable assets and liabilities initially measured both at cost and at an amount other than cost (e.g. at fair value).
In this illustration, HK Listco measures any identifiable assets and liabilities initially measured at an amount other than cost in
accordance with the appliable standards. HK Listco then allocates the residual cost of acquisition to the remaining identifiable assets
and liabilities based on their relative fair values at the date of acquisition.
Alternatively, the cost of the acquisition is allocated to the individual identifiable assets and liabilities based on their relative fair values
at the date of acquisition, and the initial measurement requirements in the applicable standards are then applied to each identifiable
asset acquired and liability assumed. Any difference between the amount at which the asset and liability is initially measured and its
individual transaction price is accounted for applying the relevant requirements.
110 The principles for identifying related party relationships under HKAS 24 can be summarised as follows:
• The definitions are symmetrical, i.e. if A is related to B for the purpose of B's financial statements, then B is related to A in A's
financial statements. One exception to this principle is the relationship between an entity and a management entity. A
management entity that provides key management personnel (KMP) services to the reporting entity (or parent of the reporting
entity) is a related party of the reporting entity. However, the reporting entity is not a related party of the management entity
solely as a consequence of being a customer of the management entity.
•
In respect of indirect relationships involving at least significant influence, presence of control or joint control in at least one leg of
an indirect relationship leads to a related party relationship (for example, a subsidiary is related to a fellow subsidiary as both
entities are under common control, but an associate is not related to a fellow associate, as the common linkage is only via
significant influence on both legs).
KMP relationships are treated as being equivalent in strength to significant influence.
• There is no distinction between an individual and his/her close family members i.e. if the individual is a related party, then so are
his/her close family members.
75
© 2023 KPMG, a Hong Kong partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited ("KPMG International"),
a private English company limited by guarantee. All rights reserved.View entire presentation