IAS 23 Borrowing Costs
Page 74 (MNC)
(a) In order to capitalize the borrowing costs, a weighted-average cost of funds borrowed is
computed:
= ($5 million × 7%) + ($7 million × 8%) + ($10 million × 9%) / ($5 million + $7 million + $10
million)
= ($1.81 million / $22 million) × 100
= 8.22 % per annum
(b) Total borrowing cost = $20 million × 8.22 % per annum × 2 years
= $1.644 million × 2 years
= $3.288 million
(c) Borrowing costs to be capitalized = Interest expense – investment income [resulting from
investment of idle funds]
= $3,288,000 – $500,000
= $2,788,000
(3a) The cost of an item of property, plant and equipment may include borrowing costs incurred for
the purpose of acquiring or constructing it. IAS 23 Borrowing Costs requires such borrowing costs to
be capitalised if the asset takes a substantial period of time to be prepared for its intended use or sale.
The definition of borrowing costs includes interest expense calculated by the effective interest method,
finance charges on finance leases and exchange differences arising from foreign currency borrowings
relating to interest costs. Borrowing costs should be capitalised during construction and include the
costs of funds borrowed for the purpose of financing the construction of the asset, and general
borrowings which would have been avoided if the expenditure on the asset had occurred. The general
borrowing costs are determined by applying a capitalisation rate to the expenditure on that asset. The
capitalisation rate will be the weighted average of the borrowing costs applicable to the general pool.
The weighted-average carrying amount of the stadium during the period is
$(20 + 70 + 120 + 170) million/4, that is $95 million.
The capitalisation rate of the borrowings of Emcee during the period of construction is 9% per annum,
therefore the total amount of borrowing costs to be capitalised is the weighted-average carrying
amount of the stadium multiplied by the capitalisation rate.
That is ($95 million x 9% x 4/12) $2·85 million.
(4b) IAS 23 Borrowing Costs states that such costs which are directly attributable to the acquisition,
construction or production of a qualifying asset form part of the cost of that asset and, therefore,
should be capitalised. Other borrowing costs are recognised as an expense. Thus the change in
accounting policy actually only brings Zack in line with IFRS, with the result that there is an
accounting error which will require a prior period adjustment. In applying the new accounting policy,
Zack has identified that there is another asset where there is a material impact if borrowing costs
should have been capitalised during the construction period. This contract was completed during 2012.
Thus, the financial statements for the year ended 30 November 2012 should be restated to apply the
new policy to this asset. The effects of the restatement are as follows: at 30 November 2012, the
carrying amount of property, plant and equipment is restated upwards by $2 million less depreciation
for the period and this would result in an increase in profit or loss for the period of the same amount.
Disclosures relating to prior period errors include: the nature of the prior period error for each prior
period presented, to the extent practicable; the amount of the correction for each financial statement
line item affected; and for basic and diluted earnings per share, the amount of the correction at the
beginning of the earliest prior period presented. The disclosure would include the nature of the prior
period error.
The line items in the statement of profit or loss and other comprehensive income would also change.
For the current period, Zack would disclose the impact of the prior period error of $3 million. It can
be assumed that, because the asset is under construction, there will be no depreciation on the asset.
The change in the depreciation method is not a change in an accounting policy but a change in an
accounting estimate. For changes in accounting estimates, Zack should disclose the nature and the
amount of the change which affects the current period or which it is expected to have in future periods.
It should be noted that IAS 8 does permit an exception where it is impracticable to estimate the effect
on future periods. Where the effect on future periods is not disclosed because it is impracticable, that
fact should be disclosed. The revision results in an increase in depreciation for 2013 of $6m and the
disclosure of an estimated increase for 2014 of $8m.
The systems error has resulted in a prior period error. In order to correct this error, Zack should restate
the prior year information for the year ended 30 November 2012 for the $2m in the statement of profit
or loss and other comprehensive income. Additionally, the trade creditors figure in the statement of
financial position is overstated by $2 million and should be restated. The movement in reserves note
will also require restating. This is not a correction of an accounting estimate.
IFRS 5 NCA held for sale and discontinued operation
(1b) An asset or disposal group is available for immediate sale in its present condition, if the entity
has the intention and ability to transfer the asset or disposal group to a buyer. There is no guidance in
the standard on what constitutes available for immediate sale but the guidance notes set out various
examples.
Customary terms of sale such as surveys and searches of property do not preclude the classification as
held for sale. However, present conditions do not include any conditions that have been imposed by
the seller of the asset or disposal group, such as if planning permission is required before sale.
In this case, the asset is not held for sale. The problem is determining whether the entity truly intends
to dispose of the group of assets. A sale is ‘highly probable’ where it is significantly more likely than
probable that the sale will occur and probable is defined as ‘more likely than not’.
IFRS 5 attempts to clarify what this means by setting out the criteria for a sale to be highly probable.
These criteria are: there is evidence of management commitment; there is an active programme to
locate a buyer and complete the plan; the asset is actively marketed for sale at a reasonable price
compared to its fair value; the sale is expected to be completed within 12 months of the date of
classification; and actions required to complete the plan indicate that it is unlikely that there will be
significant changes to the plan or that it will be withdrawn.
Because the standard defines ‘highly probable’ as ‘significantly more likely than probable’, this
creates a high threshold of certainty before recognition as held-for-sale. IFRS 5 expands on this
requirement with some specific conditions but the uncertainty still remains. Thus, a number of issues
has arisen over the implementation of the standard, mainly due to the fact that there is subjectivity
over the requirements of the standard.
(3d) IAS 34 Interim Financial Reporting requires an entity to apply the same accounting policies in its
interim financial statements as are applied in its annual financial statements. Measurements should be
made on a ‘year to date’ basis.
In valuing the property, Minco should use the provisions of IFRS 5 Assets held for Sale and
Discontinued Operations. Immediately before the initial classification of the asset as held for sale, the
carrying amount of the asset should be measured in accordance with applicable IFRSs. After
classification as held for sale, the property should be measured at the lower of carrying amount and
fair value less costs to sell.
Impairment must be considered both at the time of classification as held for sale and subsequently in
accordance with the applicable IFRSs. Any impairment loss is recognised in profit or loss unless the
asset has previously been measured at a revalued amount under IAS 16 or IAS 38, in which case the
impairment is treated as a revaluation decrease.
A gain for any subsequent increase in fair value less costs to sell of an asset is recognised in the profit
or loss to the extent that it is not in excess of the cumulative impairment loss which has been
recognised in accordance with IFRS 5 or previously in accordance with IAS 36. At the time of
classification as held for sale, depreciation needs to be charged for the four months to 1 October 2013.
This will be based upon the year end value at 31 May 2013 of $2·65 million. The property has 10
years life remaining based upon the depreciation to date and assuming a zero residual value, the
depreciation for the four months will be approximately $0·1 million.
Thus, at the time of classification as held for sale, after charging depreciation for the four months of
$0·1 million, the carrying amount is $2·55 million ($4m – $1 – $0·1m – $0·35m) and fair value less
costs to sell is assessed at $2·4 million. Accordingly, the initial write-down on classification as held
for sale is $150,000 and the property is carried at $2·4 million.
On 1 December 2013 in the interim financial statements, the property market has improved and fair
value less costs to sell is reassessed at $2·52 million. The gain of $120,000 is less than the cumulative
impairment losses recognised to date ($350,000 plus $150,000, i.e. $500,000). Accordingly, it is
credited in profit or loss and the property is carried at $2·52 million.
On 31 May 2014, the property market has continued to improve, and fair value less costs to sell is
now assessed at $2·95 million. The further gain of $430,000 is, however, in excess of the cumulative
impairment losses recognised to date ($350,000+$150,000 – $120,000 – $430,000, i.e. $50,000).
Accordingly, a restricted gain of $380,000 is credited in profit or loss and the property is carried at
$2·9 million.
Subsequently, the property is sold for $3 million at which point a gain of $100,000 is recognised. This
sale would be a non-adjusting event under IAS 10 Events after the Reporting Period if deemed to be
material.
(3c) Under IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, a disposal group is
classified as held for sale where its carrying amount will be recovered principally through sale rather
than continuing use. The sale should be expected to be complete within one year from the date of
classification. A disposal group can, exceptionally, be classified as held for sale/discontinued after a
period of 12 months if it meets certain criteria.
These are: that during the initial one-year period, circumstances arose that were previously considered
unlikely and, as a result, a disposal group previously classified as held for sale is not sold by the end
of that period. Also during the initial one-year period, the entity took action necessary to respond to
the change in circumstances such that the non-current asset (or disposal group) is being actively
marketed at a price that is reasonable, given the change in circumstances, and the criteria for
classification as held for sale are met.
The draft agreements with investment bankers appear not to be sufficiently detailed to prove that the
subsidiary met the criteria at the point of classification as required by IFRS 5. This requires the
disposal group to be available for immediate sale in its present condition subject only to terms that are
usual and customary for sales of such disposal groups. Also, Janne had made certain organisational
changes during the year to 31 May 2013, which resulted in additional activities being transferred to
the subsidiary.
This confirms that the subsidiary was not available for sale in its present condition as at the point of
classification. Also, the shareholders’ authorisation to sell the subsidiary was only granted for one
year and there is no indication that this was extended by the subsequent shareholders’ meeting in 2013.
The subsidiary should have been treated as a continuing operation in the financial statements for both
years ended 31 May 2012 and 31 May 2013.
IFRS 15 Revenue from contracts with customers
(2b) IFRS 15 Revenue from Contracts with Customers states that an entity is a principal where the
entity controls the promised good before transfer to the customer. However, the entity is an agent
where the performance obligation is to arrange provision of the goods by another party.
Although Formatt has subcontracted the manufacturing of the equipment to a supplier, the
development of the specification, the manufacturing of the equipment, and the overall management of
the contract are not distinct because they are not separately identifiable and thus there is a single
performance obligation. The customer has contracted with Formatt so that the various elements of the
contract are integrated as one obligation.
Therefore, Formatt controls the specialised equipment before the equipment is transferred to the
customer and is therefore the principal in this transaction. Formatt is also responsible for any defects.
The supplier cannot decide to use the specialised equipment for another purpose as the equipment
must be delivered to the customer to fulfil the promise in the contract. Formatt has the responsibility
for fulfilling the contract, determines the price of the contract, is not paid on a commission basis and
has the credit risk.
(4bii) Tang accounts for the promised bundle of goods and services as a single performance obligation
satisfied over time in accordance with IFRS 15. At the inception of the contract, Tang expects the
following: Transaction price $1,500,000 Expected costs $800,000 Expected profit (46·7%) $700,000.
At contract inception, Tang excludes the $100,000 bonus from the transaction price because it cannot
conclude that it is highly probable that a significant reversal in the amount of cumulative revenue
recognised will not occur. Completion of the printing machine is highly susceptible to factors outside
the entity’s influence.
By the end of the first year, the 22 entity has satisfied 65% of its performance obligation on the basis
of costs incurred to date. Costs incurred to date are therefore $520,000 and Tang reassesses the
variable consideration and concludes that the amount is still constrained. Therefore at 30 November
2015, the following would be recognised: Revenue $975,000 Costs $520,000 Gross profit $455,000
However, on 4 December 2015, the contract is modified.
As a result, the fixed consideration and expected costs increase by $110,000 and $60,000, respectively.
The total potential consideration after the modification is $1,710,000 which is $1,610,000 fixed
consideration + $100,000 completion bonus. In addition, the allowable time for achieving the bonus is
extended by six months with the result that Tang concludes that it is highly probable that including the
bonus in the transaction price will not result in a significant reversal in the amount of cumulative
revenue recognised in accordance with IFRS 15.
Therefore the bonus of $100,000 can be included in the transaction price. Tang also concludes that the
contract remains a single performance obligation. Thus,Tang accounts for the contract modification as
if it were part of the original contract. Therefore, Tang updates its estimates of costs and revenue as
follows: Tang has satisfied 60·5% of its performance obligation ($520,000 actual costs incurred
compared to $860,000 total expected costs). The entity recognises additional revenue of $59,550
[(60·5% of $1,710,000) – $975,000 revenue recognised to date] at the date of the modification as a
cumulative catch-up adjustment. As the contract amendment took place after the year end, the
additional revenue would not be treated as an adjusting event.
(4bi) The contract contains a significant financing component because of the length of time between
when the customer pays for the asset and when Tang transfers the asset to the customer, as well as the
prevailing interest rates in the market. A contract with a customer which has a significant financing
component should be separated into a revenue component (for the notional cash sales price) and a
loan component.
Consequently, the accounting for a sale arising from a contract which has a significant financing
component should be comparable to the accounting for a loan with the same features. An entity
should use the discount rate which would be reflected in a separate financing transaction between the
entity and its customer at contract inception. The interest rate implicit in the transaction may be
different from the rate to be used to discount the cash flows, which should be the entity’s incremental
borrowing rate. IFRS 15 would therefore dictate that the rate which should be used in adjusting the
promised consideration is 5%, which is the entity’s incremental borrowing rate, and not 11·8%.
Tang would account for the significant financing component as follows:
Recognise a contract liability for the $240,000 payment received on 1 December 2014 at the contract
inception:
Dr Cash $240,000 Cr Contract liability $240,000
During the two years from contract inception (1 December 2014) until the transfer of the printing
machine, Tang adjusts the amount of consideration and accretes the contract liability by recognising
interest on $240,000 at 5% for two years.
Year to 30 November 2015
Dr Interest expense $12,000 Cr Contract liability $12,000
Contract liability would stand at $252,000 at 30 November 2015.
Year to 30 November 2016
Dr Interest expense $12,600 Cr Contract liability $12,600
Recognition of contract revenue on transfer of printing machine at 30 November 2016 of $264,600 by
debiting contract liability and crediting revenue with this amount.
(3a) IFRS 15 Revenue from Contracts with Customers sets out the core principle that an entity will
recognise revenue to depict the transfer of promised goods or services to customers in an amount
which reflects the consideration to which the entity expects to be entitled in exchange for those goods
or services. This principle is delivered through a five-step model. Once the contract with the customer
has been identified, step 2 of the model identifies those elements of the contract which should be
accounted for separately.
The performance obligations should be identified at the beginning of the contract by identifying
distinct goods or services in the contract. To do so, the entity should identify all the goods and
services which have been promised. The distinct performance obligations are the units of account
which determine when and how revenue is recognised. A good or service is distinct only if the
customer can benefit from the good or service either on its own or together with other resources
available to the customer and the good or service is separately identifiable from other promises in the
contract.
A customer can benefit from a good or service on its own if it can be used, consumed, or sold to
generate economic benefits. Determining whether a good or service is distinct within the context of
the contract requires assessment of the contract terms and the intent of the parties. Thus in the case of
Darlatt, the entity is required to assess whether the deliverables it has promised to the customer give
rise to separate performance obligations. The purchase of the wind turbine and the maintenance
contract are obviously separate performance obligations.
However, the two warranties require further consideration. The nature of the warranty will determine
the accounting impact. IFRS 15 states that an entity accounts for a warranty as a separate performance
obligation if the customer has the option to purchase the warranty separately. An entity accounts for a
warranty as a cost accrual if it is not sold separately, unless the warranty is to provide the customer
with a service in addition to assurance that the product complies with agreed specifications.
The free warranty simply provides the customer with the assurance that the wind turbine meets the
agreed specification and thus is not a separate performance obligation. Where the warranty provides
an additional service as is the case with the ten-year warranty, then the income will be treated as
deferred revenue.
Once the separate performance obligations have been identified, then the transaction price is allocated
to them based on the relative stand-alone selling prices of the goods or services promised. This
allocation is made at contract inception and not adjusted to reflect subsequent changes in the stand-
alone selling prices of those goods or services. The best evidence of stand-alone selling price is the
observable price of a good or service when the entity sells that good or service separately. Therefore,
the wind turbine will be allocated with ($3·2m/$4·1m x $3·6m), i.e. $2·8 million and the maintenance
contract with ($0·9m/$4·1m x $3·6m), i.e. $0·8 million of the total revenue. Thus the maintenance
contract and additional warranty will be recognised over time and the sale of the wind turbine and free
warranty will be recognised at a point in time. Where revenue is recognised over time, a method
should be used which best reflects the pattern of transfer of goods or services to the customer. In this
case, it would appear that both of the above elements would be recognised over 10 years.
(3c) IFRS 15 Revenue from Contracts with Customers specifies how to account for costs incurred in
fulfilling a contract which are not in the scope of another standard. Costs to fulfil a contract which is
accounted for under IFRS 15 are divided into those which give rise to an asset and those which are
expensed as incurred. Entities will recognise an asset when costs incurred to fulfil a contract meet
certain criteria, one of which is that the costs are expected to be recovered. For costs to meet the
‘expected to be recovered’ criterion, they need to be either explicitly reimbursable under the contract
or reflected through the pricing of the contract and recoverable through the margin.
The penalty and additional costs attributable to the contract should be considered when they occur and
Carsoon should have included them in the total costs of the contract in the period in which they had
been notified. As regards the counter claim for compensation, Carsoon accounts for the claim as a
contract modification in accordance with IFRS 15. The modification does not result in any additional
goods and services being provided to the customer.
In addition, all of the remaining goods and services after the modification are not distinct and form
part of a single performance obligation. Consequently, Carsoon should account for the modification
by updating the transaction price and the measure of progress towards complete satisfaction of the
performance obligation.
A contract modification may exist even though the parties to the contract have a dispute about the
scope or price (or both) of the modification or the parties have approved a change in the scope of the
contract but have not yet determined the corresponding change in price. In determining whether the
rights and obligations which are created or changed by a modification are enforceable, an entity
should consider all relevant facts and circumstances including the terms of the contract and other
evidence.
On the basis of information available, it is possible to feel that the counter claim had not reached an
advanced stage, so that claims submitted to the client could not be included in total revenues. When
the contract is modified for the construction of the storage facility, an additional $7 million is added to
the consideration which Carsoon will receive. The additional $7 million reflects the stand-alone
selling price of the contract modification. The construction of the separate storage facility is a distinct
performance obligation; the contract modification for the additional storage facility would be, in
effect, a new contract which does not affect the accounting for the existing contract.
Therefore the contract is a performance obligation which has been satisfied as assets are only
recognised in relation to satisfying future performance obligations. General and administrative costs
cannot be capitalised unless these costs are specifically chargeable to the customer under the contract.
Similarly, wasted material costs are expensed where they are not chargeable to the customer.
Therefore a total expense of $15 million will be charged to profit or loss and not shown as assets.
IFRS 15 Revenue from contracts with customers
PYQ DEC 2015 Q4(b) Pg 159
(ii) Tang accounts for the promised bundle of goods and services as a single performance obligation
satisfied over time in accordance with IFRS 15. At the inception of the contract, Tang expects the
following: Transaction price $1,500,000 Expected costs $800,000 Expected profit (46·7%) $700,000
At contract inception, Tang excludes the $100,000 bonus from the transaction price because it
cannot conclude that it is highly probable that a significant reversal in the amount of cumulative
revenue recognised will not occur. Completion of the printing machine is highly susceptible to
factors outside the entity’s influence. By the end of the first year, the entity has satisfied 65% of its
performance obligation on the basis of costs incurred to date. Costs incurred to date are therefore
$520,000 and Tang reassesses the variable consideration and concludes that the amount is still
constrained. Therefore at 30 November 2015, the following would be recognised: Revenue $975,000
Costs $520,000 Gross profit $455,000
However, on 4 December 2015, the contract is modified. As a result, the fixed consideration and
expected costs increase by $110,000 and $60,000, respectively. The total potential consideration
after the modification is $1,710,000 which is $1,610,000 fixed consideration + $100,000 completion
bonus. In addition, the allowable time for achieving the bonus is extended by six months with the
result that Tang concludes that it is highly probable that including the bonus in the transaction price
will not result in a significant reversal in the amount of cumulative revenue recognised in accordance
with IFRS 15. Therefore the bonus of $100,000 can be included in the transaction price. Tang also
concludes that the contract remains a single performance obligation. Thus,Tang accounts for the
contract modification as if it were part of the original contract. Therefore, Tang updates its estimates
of costs and revenue as follows: Tang has satisfied 60·5% of its performance obligation ($520,000
actual costs incurred compared to $860,000 total expected costs). The entity recognises additional
revenue of $59,550 [(60·5% of $1,710,000) – $975,000 revenue recognised to date] at the date of
the modification as a cumulative catch-up adjustment. As the contract amendment took place after
the year end, the additional revenue would not be treated as an adjusting event.
PYQ JUNE 2017 Q3c
IFRS 15 Revenue from Contracts with Customers specifies how to account for costs incurred in
fulfilling a contract which are not in the scope of another standard. Costs to fulfil a contract which is
accounted for under IFRS 15 are divided into those which give rise to an asset and those which are
expensed as incurred. Entities will recognise an asset when costs incurred to fulfil a contract meet
certain criteria, one of which is that the costs are expected to be recovered. For costs to meet the
‘expected to be recovered’ criterion, they need to be either explicitly reimbursable under the
contract or reflected through the pricing of the contract and recoverable through the margin. The
penalty and additional costs attributable to the contract should be considered when they occur and
Carsoon should have included them in the total costs of the contract in the period in which they had
been notified. As regards the counterclaim for compensation, Carsoon accounts for the claim as a
contract modification in accordance with IFRS 15.
The modification does not result in any additional goods and services being provided to the
customer. In addition, all of the remaining goods and services after the modification are not distinct
and form part of a single performance obligation. Consequently, Carsoon should account for the
modification by updating the transaction price and the measure of progress towards complete
satisfaction of the performance obligation. A contract modification may exist even though the
parties to the contract have a dispute about the scope or price (or both) of the modification or the
parties have approved a change in the scope of the contract but have not yet determined the
corresponding change in price. In determining whether the rights and obligations which are created
or changed by a modification are enforceable, an entity should consider all relevant facts and
circumstances including the terms of the contract and other evidence. On the basis of information
available, it is possible to feel that the counter claim had not reached an advanced stage, so that
claims submitted to the client could not be included in total revenues.
When the contract is modified for the construction of the storage facility, an additional $7 million is
added to the consideration which Carsoon will receive. The additional $7 million reflects the stand-
alone selling price of the contract modification. The construction of the separate storage facility is a
distinct performance obligation; the contract modification for the additional storage facility would
be, in effect, a new contract which does not affect the accounting for the existing contract.
Therefore the contract is a performance obligation which has been satisfied as assets are only
recognised in relation to satisfying future performance obligations. General and administrative costs
cannot be capitalised unless these costs are specifically chargeable to the customer under the
contract. Similarly, wasted material costs are expensed where they are not chargeable to the
customer. Therefore a total expense of $15 million will be charged to profit or loss and not shown as
assets.
IAS 19 Employee Benefits
PYQ JUNE 2012 Q2b Pg 186
Under IAS 19 Employee Benefits, the accounting procedures would be: Recognition of actuarial gains
and losses (remeasurements): Actuarial gains and losses are renamed ‘remeasurements’ and will be
recognised immediately in ‘other comprehensive income’ (OCI). Actuarial gains and losses cannot be
deferred or recognised in profit or loss; this is likely to increase volatility in the statement of financial
position and OCI. Remeasurements recognised in OCI cannot be recycled through profit or loss in
subsequent periods. Thus William will not be able to spread these gains and losses over the
remaining working life of the employees. Recognition of past service cost: Past-service costs are
recognised in the period of a plan amendment; unvested benefits cannot be spread over a future-
service period. The plan benefits which were enhanced on 1 June 2011 would have to be
immediately recognised and the unvested benefits would not be spread over five years from that
date. A curtailment occurs only when an entity reduces significantly the number of employees.
Curtailment gains/losses are accounted for as past-service costs. Thus William will need to realise
that any curtailment is only recognised in these circumstances and will result in immediate
recognition of any gain or loss. Measurement of pension expense: Annual expense for a funded
benefit plan will include net interest expense or income, calculated by applying the discount rate to
the net defined benefit asset or liability. The discount rate used is a high-quality corporate bond rate
where there is a deep market in such bonds, and a government bond rate in other markets.
Presentation in the income statement: The benefit cost will be split between (i) the cost of benefits
accrued in the current period (service cost) and benefit changes (past-service cost, settlements and
curtailments); and (ii) finance expense or income. This analysis can be in the income statement or in
the notes.
IFRS 2 SHARE BASED PAYMENT
PYQ DEC 2010 Q2d Pg 231
Share-based payment awards exchanged for awards held by the acquiree’s employees are measured
in accordance with IFRS 2 ‘Share-based payment’. If the acquirer is obliged to replace the awards,
some or all of the fair value of the replacement awards must be included in the consideration. The
amount not included in the consideration will be recognised as a compensation expense. If the
acquirer is not obliged to exchange the acquiree’s awards, the acquirer does not adjust the
consideration even if the acquirer does replace the awards. A portion of the fair value of the award
granted by Margie is accounted for under IFRS 3 and a portion under IFRS 2, even though no post-
combination services are required. The amount included in the cost of the business combination is
the fair value of Antalya’s award at the acquisition date ($20 million). Any additional amount, which
in this case is $2 million, is accounted for as a post-combination expense under IFRS 2. This amount
is recognised immediately as a post-combination expense because no post-combination services are
required.