How should intangibles that are part of business combinations be recognized?

In the context of business combinations, intangibles should be recognized at fair value if they are identifiable and separable from the acquiree. This is in accordance with the International Financial Reporting Standards (IFRS), particularly IFRS 3, which outlines the accounting treatment for business combinations.

When a company acquires another business, it may acquire not only tangible assets but also intangible assets such as trademarks, patents, customer lists, and goodwill. The requirement to measure these identifiable intangible assets at fair value reflects the principle that an acquirer should account for all the acquired identifiable assets and liabilities at their fair value at the acquisition date. This provides a more accurate depiction of the resources that the acquirer has gained from the acquisition and offers a relevant basis for future accounting and valuation.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. By using fair value as a measurement basis for identifiable intangible assets that are separable, the financial statements of the combined entity can reflect the true value of the resources acquired.

This treatment not only enhances transparency and comparability of financial statements but also ensures that management is held accountable for the value of the intangible assets they manage