Upon acquisition date, assets and liabilities pertaining to the transaction are recognised at fair value, except for any anticipated and deferred taxes and assets and liabilities relating to benefits in favour of employees, which are valued according to the relevant reference principle.
Accessory charges relating to the transaction are recognised under income statement in the financial year in which they are incurred.
Goodwill represents the difference between acquisition price, minority shareholders’ equity and the fair value of any interest previously held in the acquired company against the fair value of the net assets and liabilities acquired upon completion of the transaction.
When the value of the net assets and liabilities purchased on the acquisition date exceeds the acquisition price, the minority shareholders’ equity and the fair value of any interest previously held in the acquired company, such excess amount is recognised under income statement in the year in which the acquisition transaction is completed.
Minority Shareholders’ equity may be valued, at acquisition date, either at fair value or pro-rata of the net assets recognised for the acquired company.
The valuation method is selected on a case-by-case basis.
For the purpose of calculating goodwill, any prices relating to the acquisition subject to the conditions of, and envisaged by business combination contract, are valued at fair value as at the acquisition date and included in the relevant acquisition price.
Any subsequent changes in the fair value, referred to as adjustments deriving from additional information provided about facts and circumstances existing on the business combination completion date and in any case identified within the subsequent twelve months, are retrospectively included in the value of goodwill.
In case of business combinations accomplished in subsequent steps, the interest previously held in the acquired company is subject to revaluation at fair value from the date of control acquisition and any resulting profit or loss is recognised under income statement in the year in which the transaction is completed.
Should the values of the assets and liabilities acquired be incomplete as at the date of drafting of these financial statements , the Group recognises provisional values that will be later subject to adjustments in the financial year of reference within twelve months thereafter, so as to take into account any new information about facts and circumstances existing on the acquisition date, that, if made available earlier, would have had an impact on the value of the assets and liabilities recognised on that same date.
Business combinations completed before 1 January 2010 are recognised pursuant to the provisions contained in the previous version of IFRS 3.
8.1 Acquisition of 50% of Mondolibri SpA
At the end of April 2010, Arnoldo Mondadori Editore SpA acquired 50% of Mondolibri SpA share capital from Società Holding Industriale di Grafica SpA (Bertelsmann Group), thus increasing its shareholding to 100%.
Mondolibri SpA is a leader company in the Italian distance selling market for books, editorial products and multimedia products through its “club” formula, and also has over 70 sales outlets and an on-line platform.
The company is also one of Italy’s main e-commerce operators through its Bol.it website.
The €6.75 million worth transaction represents a business combination pursuant to IFRS 3R, since it gives the Mondadori Group exclusive control on the company.
Following to the application of the afore-mentioned accounting standard and specifically pursuant to the economic entity theory, goodwill accounted for € 7.7 million on the 50% acquired amount and the revaluation of the 50% interest previously held amounted to €2.7 million. The latter was recognised under income statement in “Income (charges) from investments stated according to the equity method”.
Goodwill was calculated on the estimate of the fair value of the different company assets acquired based on cash flow discounting deriving from the latest approved three-year plan.
Discounting comprised a pre-tax discount rate consistently with the economics used, and the weighted average cost of capital was calculated by making reference to the capital asset pricing model, which is representative of the Cash Generating Units specific risks .
The following table shows the values, broken down by assets and liabilities, identified as at acquisition date.
| (€ 000) |
|
Carrying value |
|---|---|---|
|
|
|
|
| Intangible assets |
|
0.2 |
| Property, plant and equipment |
|
1.2 |
| Trade receivables |
|
7.5 |
| Inventory |
|
6.7 |
| Other current and non-current assets |
|
5.6 |
| Trade payables |
|
(17.7) |
| Other current and non-current liabilities |
|
(6.4) |
| Net financial liabilities |
|
- |
| Cash and other cash equivalents |
|
8.7 |
| Net purchased assets | A | 5.8 |
|
|
|
|
| Amount paid | B | 13.5 |
|
|
|
|
| Goodwill | B-A | 7.7 |
|
|
|
|
| Carrying value of investment (50%) at 1 January 2010 |
|
4.4 |
| Pro-rata result for period 01/01-27/04/2010 |
|
(0.3) |
| Total carrying value at 27/04/2010 | C | 4.1 |
|
|
|
|
| Fair value of share already held (50%) | D | 6.8 |
|
|
|
|
| Income from re-valuation of share already held | D-C | 2.7 |
8.2 Acquisition of 40% of Mach 2 Press Srl
At the end of April 2010 Mach 2 Libri SpA, a company specialising in the distribution of books and magazines through the Grande Distribuzione Organizzata network in which Mondadori holds a 34.91% stake, set up a new company, Mach 2 Press Srl, through the transfer of the business concern relative to the magazines distribution activity.
Subsequently, in May 2010 Mach 2 Libri SpA transferred 80% of the new company’s share capital: 40% to Press-Di Distribuzione Stampa e Multimedia Srl (Mondadori Group) and 40% to m-dis Distribuzione Media SpA (RCS Group).
As a result of the transaction described above, which does not qualify as business combination, Mondadori holds the same shareholding it previously held in Mach 2 Libri SpA and acquired a 46.98% stake in Mach 2 Press Srl.
8.3 Stake reduction in Agenzia Lombarda Distribuzione Giornali e Riviste Srl
In April 2010 Mondadori, Sodip SpA and RCS decided to set up an entity specialising in the distribution activities regarding newspapers and magazines in Milan and the surrounding area.
As a result, Milano Press Srl transferred a business concern into Agenzia Lombarda Distribuzione Giornali e Riviste Srl, following to which the stake held by the Mondadori Group in the new company, which was renamed MDM Milano Distribuzione Media Srl, reduced from 50% to 20%.
This transaction, which does not qualify as a business combination pursuant to IFRS 3 revised, generated an income of a few dozens of euro thousands