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Keeping track of changes and developments in GST/HST, Quebec sales tax and other provincial sales taxes across Canada, can be a full-time job. The consequences for failing to adequately manage your organization’s sales tax obligations can be significant - from assessments, to forgone recoveries and cash flow implications, to customer or reputational risk.
Global mobility services
In today’s competitive and global marketplace, your employee mobility strategy is a critical factor for success. International opportunities are key to attracting top talent and instilling a global mindset across your organization. Your people truly are your most valuable asset, and as your expatriate workforce continues to grow, a seamless global mobility program is essential to achieving your overall business goals.
US corporate tax
The United States has a very complex and regulated tax environment, that may undergo significant changes. Cross-border tax issues could become even more challenging for Canadian businesses looking for growth and prosperity in the biggest economy in the world.
US personal tax
Whether your business is only beginning to sell to US customers, or US customers represent the core of your business, anticipating and dealing knowledgeably with the US tax environment is critical to your bottom line. Our full-service US corporate tax group can help in all tax aspects of doing business in the US. Given high US corporate tax rates, don't be surprised by a US tax liability only to find out that there were planning opportunities available to reduce it.
While there is great opportunity for businesses looking to expand globally, organizations are under increasing tax scrutiny. Regardless of your company’s size and level of international involvement—whether you’re working abroad, investing, buying and selling, borrowing or manufacturing—doing business beyond Canada’s borders comes with its fair share of tax risks.
Transfer pricing is a complex area of corporate taxation that is concerned with the intra-group pricing of goods, services, intangibles, and financial instruments. Transfer pricing has become a critical governance issue for companies, tax authorities and policy makers, and represents a principal risk area for multinationals.
Succession & estate planning
Like many private business owners today, you’ve spent your career building and running your business successfully. Now you’re faced with deciding on a successor—a successor who may or may not want your direct involvement and share your vision.
Tax Reporting & Advisory
The financial and tax reporting obligations of public markets and global tax authorities take significant resources and investment to manage. This requires calculating global tax provision estimates under US GAAP, IFRS, and other frameworks, and reconciling this reporting with tax compliance obligations.
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The oil and gas industry is facing many complex challenges, beyond the price of oil. These include environmental issues, access to markets, growing competition from alternative energy sources and international markets, and a rapidly changing regulatory landscape, to name but a few.
Identifying the acquisition date
Acquisitions of businesses can take many forms and can have a fundamental impact of the acquirer’s operations, resources and strategies. These acquisitions are known as mergers or business combinations which should be accounted for using the requirements in IFRS 3 ‘Business Combinations’.
Our ‘Insights into IFRS 3’ series summarizes the key areas of the Standard, highlighting aspects that are more difficult to interpret and revisiting the most relevant features that could impact your business. This article discusses how to identify the date of acquisition or the date the business combination is affected.
This article should be read closely with our other ‘identification’ articles:
- Insights into IFRS 3 – Identifying a business combination within the scope of IFRS 3
- Insights into IFRS 3 – Identifying an acquirer
How does IFRS 3 define the acquisition date?
IFRS 3 defines the acquisition date as the date the acquirer obtains control of the acquiree. In a combination effected by a sale and purchase agreement, this is generally the specified closing or completion date (the date when the consideration is transferred and acquiree shares or underlying net assets are acquired).
The acquisition date is critical because it determines when the acquirer recognises and measures the consideration transferred, the assets acquired, and liabilities assumed. The acquiree’s results are consolidated from this date. The acquisition date materially impacts the overall acquisition accounting, including post-combination earnings. The acquisition date is often readily apparent from the structure of the business combination and the terms of the sale and purchase agreement (if applicable) but this is not always the case. Complications can arise because of the many ways, both contractual and non-contractual, that business combinations can be put together.
The period between the start of negotiations and final settlement of all aspects of a combination can be protracted. Applicable corporate laws, shareholder approval requirements, competition rules and stock market regulations also vary and may affect the analysis and the date at which control is transferred to the acquirer. Because no two business combination transactions are identical, there are few (if any) ‘rules of thumb’ to assist in identifying the acquisition date. Instead, the definition of control should be applied to the specific facts and circumstances of each situation. Judgement will often be required, and disclosure of the assessment made will need to be fully disclosed under the requirements of IAS 1 ‘Presentation of Financial Statements’. The following are some examples of situations which require analysis and their relevant considerations when determining the date of when an acquisition of a business has taken place:
The purchase agreement specifies that control is transferred on an effective date different from the closing date
Consider whether the provisional effective date actually changes the acquisition date. In practice, many of these types of provisions are simply mechanisms to adjust the price but may not affect the date when control is obtained. An agreement that artificially backdates the date of acquisition cannot justify the acquisition date (from an accounting perspective) being the earlier date. In other words, it cannot be subsequently decided that control took place at a date when the acquirer and the acquiree were unlikely having any relationship. Control cannot be decided afterwards on the basis of a contractual term that artificially places the acquisition date before the terms of the contract provided the acquirer with the benefits associated of returns from that date.
The purchase is complete subject to shareholder approval
Consider the date when the acquirer can effect change in the board of directors of the acquiree. Until the approval is obtained it would be difficult to consider that control has been transferred.
The purchase is complete subject to regulatory approval
Consider whether the date of regulatory approval is merely a formality. For example, a target company operates in a market and jurisdiction where the acquirer is already a significant competitor. Where this transaction requires the approval of the competition authority in that jurisdiction, it would be difficult to conclude this regulatory approval is just a formality. Therefore, until the approval is obtained, control cannot have been transferred to the acquirer.
No closing date specified
Consider, for example, when an investee repurchases own shares held by other investors resulting in an existing
shareholder becoming a majority shareholder. In this case, the starting point is to identify the date when the shareholder’s proportionate voting rights amounted to a controlling interest.
Made by public offer
Consider the date a public offer becomes unconditional (with a controlling interest acquired).
The purchase is complete subject to other conditions
Consider the date when the acquirer starts directing the acquiree’s operating and financing policies.
“The acquisition date is critical because it determines when the acquirer recognizes and measures the consideration transferred, the assets acquired, and liabilities assumed.”
IFRS insight – designating an effective date
For convenience an entity might wish to designate an acquisition date of the end (or the beginning) of a month, the date on which it closes its books, rather than the actual acquisition date (ie a date during the month). Unless events between the ‘convenience’ date and the actual acquisition date result in material changes in the amounts recognized, that entity’s practice would comply with the requirements of the Standard as noted in the Basis for Conclusions to IFRS 3.