IFRS 3 Business Combinations allows a choice on the basis of measurement for non-controlling interests. For each acquisition, the acquirer may choose to measure non-controlling interests on acquisition date at either fair value or as a proportion of identifiable net assets. The basis to measure non-controlling interests as a proportion of identifiable net assets retains the accounting treatment of the previous standard IAS 22 Business Combinations. This accounting choice puts IFRS 3 at variance with US GAAP.

Required:

1. Choose a sample of any five companies that applies IFRS 3 Business Combinations and note the basis of measurement for non-controlling interests for each of the five companies.

2. Explain the directional impact of each basis on the following measures:

(a) Total assets.

(b) Total equity.

(c) Net profit after tax.

(d) Return on equity.

(e) Debt/Equity ratio.

(f) Sales/Assets ratio.

3. Choose one of the companies that you had chosen in Question 1. Assuming that you are a shareholder or a potential investor of that company, which basis of measurement would provide you with the information that you require? Explain.

4. Choose one of the companies that you had chosen in Question 1. Assuming that you are a consultant to that company and ignoring their existing choice, advise that company on the choice of accounting basis.