IFRS 3 paras 45, 49, B67, adjustments made in measurement period, prior year adjustment

Meggitt PLC – Annual report – 31 December 2016

Industry: manufacturing

  1. Restatement of prior year comparatives

As described in note 42, the fair values of the assets and liabilities of Advanced Composites and EDAC were finalised during 2016. IFRS 3 requires fair value adjustments to be recorded with effect from the date of acquisition and consequently result in the restatement of previously reported financial results. The impact on the balance sheet as at 31 December 2015 is shown below:

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  • Represents the impact of exchange rate movements on the Advanced Composites and EDAC adjustments from the date of acquisition to the balance sheet date and other reclassifications.

The Group has not restated the income statement for the year ended 31 December 2015, as the impact on underlying profit and statutory profit was not significant.

  1. Business combinations

IFRS 3 requires fair values of assets and liabilities acquired to be finalised within 12 months of the acquisition date. During 2016, the Group finalised the fair values of the assets and liabilities of the advanced composites businesses of Cobham plc (‘Advanced Composites’) which completed on 25 November 2015 and of EDAC Composites LLC (‘EDAC’) which completed on 21 December 2015. Changes were made as necessary to align the accounting policies of the acquired businesses with those of the Group. The adjustments made in finalising fair values primarily relate to the recognition of intangible assets separately from goodwill, obligations in respect of onerous production contracts and associated deferred tax liabilities. Additionally, with regards to EDAC, it was determined that one of the businesses acquired met the criteria to be treated as a joint venture and accounted for using the equity method. Goodwill is attributable to the profitability of the acquired businesses and expected future synergies arising following their acquisition. The total amount of goodwill and other intangible assets acquired as part of the acquisitions that is deductible for tax purposes is £Nil. Fair values as at the date of each acquisition are shown below:

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  • Adjustments relate to finalisation of fair values and alignment with the Group’s accounting policies.

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  • Adjustments relate to finalisation of fair values and alignment with the Group’s accounting policies. It includes the elimination of assets and liabilities of the business which it has been determined should be accounted for using the equity method. The assets and liabilities eliminated are not significantly different to those at 31 December 2015 disclosed in note 22.

The adjustments to consideration in respect of Advanced Composites and EDAC of £1.3 million and £0.6 million respectively, relate to agreement of final working capital adjustments in respect of the acquired businesses. These amounts were received by the Group in cash in 2016.

Total consideration received/(paid) in respect of acquisitions was as follows:

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  • The amounts received during the year differ from those recorded at the date of acquisition due to the effect of exchange rate movements.
  1. Goodwill (extract)

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