Key audit matter - Goodwill You know those property flip shows? People put in 100k into $1M property and sell it for $1.3. A nice return on investment.
Well, Align Capital bought the same property ETC and flipped it for a 140% return in a year.
That $1M property magically turned into $2.4M. And $1.4M of the purchase price is on the books as "goodwill".
That goodwill is now 1/3 of the book value of Quarterhill. And the goodwill is worth more than the Apple settlement! LOL!
Maybe you should take a look again at the auditor's report?
Business Combination – valuation of acquired intangible assets
As disclosed in note 4 of the consolidated financial statements, the Company acquired all of the issued and outstanding shares of Electronic Transaction Consultant (“ETC") for cash consideration of $151 million.
The acquisition is accounted for as a business combination in accordance with IFRS 3, the estimates of which are subjective in nature in determining the fair values of identified intangible assets.
The primary element of the valuation and purchase price allocation process was to assess the fair value of intangible assets of $102 million in the form of customer relationships, technology and trade name.
Business combinations is a key audit matter in the audit due to significant management judgement in evaluating the inputs and assumptions used in the determination of fair value. The key inputs and assumptions include revenue growth, customer attrition, earnings margin and discount rate. Changes to these significant assumptions could have a significant impact on the fair value of acquired intangible assets.