Financial reporting may create transfer-pricing issues
September 27, 2007
By Anders Bjørn (Denmark), Henrik Lund (Denmark/The Netherlands) and Steven Tseng (China) of KPMG
All publicly traded companies within the EU have been required to comply with the revised International Financial Reporting Standards (IFRS) since January 1 2005. This has created fundamentally new requirements for the accounting of business combinations (IFRS 3). Under IFRS 3, all excess value over acquired book value cannot simply be recognised as goodwill without analysis or justification. Instead, the application of purchase price allocation (PPA) forces the acquiring company to recognise and measure at fair value all acquired assets and liabilities, including intangible assets and contingent liabilities.
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