Raising Capital: Service Received from Stock Exchange Listing Not Recognized as Intangible Asset
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The Philippine Interpretations Committee (PIC) has recently issued a ruling on the accounting treatment of services received from a stock exchange listing, stating that it does not meet the definition of an intangible asset under Philippine Financial Reporting Standards (PFRS).
Services Received from Stock Exchange Listing Not Recognized as Intangible Asset
According to PFRS 38, Intangible Assets, an intangible asset is identifiable if it can be separated from the entity and sold or transferred. In this case, the service received from the stock exchange listing was deemed not separable and therefore not recognized as an intangible asset.
Instead, the PIC recommended recognizing the cost of the service received as an expense in accordance with PFRS 2, Share-Based Payment.
Contingent Payments to Selling Shareholders
The PIC has also issued a ruling on contingent payments to selling shareholders who become employees. The committee stated that if the payments are automatically forfeited upon termination of employment, they should be considered remuneration for post-combination services rather than additional consideration for an acquisition.
Identification of Acquirer in Stapling Arrangement
The PIC has also issued a ruling on the identification of the acquirer in a stapling arrangement, where a business combination is achieved by contract alone without any combining entity obtaining control of the other combining entities.
According to PFRS 3 and PFRS 10, Consolidated Financial Statements, one of the combining entities must be identified as the acquirer. The PIC recommended identifying the acquirer based on paragraph B15(a) of PFRS 3, which states that the acquirer is usually the combining entity whose owners, as a group, receive the largest portion of the voting rights in the combined entity.
Conclusion
These rulings demonstrate the importance of carefully considering the accounting treatment of services received and contingent payments to selling shareholders, as well as identifying the acquirer in a stapling arrangement. It is essential for businesses to stay up-to-date with the latest accounting standards and guidelines to ensure accurate financial reporting and compliance.
Key Points:
- Services received from stock exchange listing are not recognized as intangible assets
- Contingent payments to selling shareholders who become employees should be considered remuneration for post-combination services
- In a stapling arrangement, the acquirer is usually the combining entity whose owners receive the largest portion of voting rights in the combined entity