Recognition and derecognition of acquired intangible assets

Entity A acquired an online retailer, Entity B, before its date of transition to IFRSs. Under its previous GAAP, Entity A recognised an intangible asset of ¥1,200 related to ‘deferred marketing costs, which does not meet the recognition criteria under IFRSs. Entity A also acquired customer relationships with a fair value of ¥900 that do meet the recognition criteria under IFRS 3, but which it did not recognise as an intangible asset under its previous GAAP.

Upon adoption of IFRSs, Entity A is required to derecognise the ‘deferred marketing costs intangible asset and increase the carrying amount of goodwill for a corresponding amount. Nevertheless, the customer relationship intangible asset that is subsumed in goodwill cannot be recognised as its carrying amount in the balance sheet of the acquiree, Entity B, would have been nil.