Notes to the consolidated financial statements 30 June 2022 (continued) Group structure This section of the notes provides information which will help users understand how the group structure affects the financial position and performance of the Group. 23 Business combination (a) Summary of acquisition On 20 June 2022, IGO Limited acquired 100% of the issued capital of Western Areas Limited (Western Areas). Western Areas was an ASX listed Australian-based mining and exploration company with a portfolio of operating and development stage mines. It owns a 100% interest in the Forrestania Operation (consisting of the Flying Fox and Spotted Quoll underground mines and the Cosmic Boy processing facility) and the Cosmos Project, both located in Western Australia, together with a substantial exploration portfolio. The purchase price of $1,262.5 million was based on consideration of $3.87 per Western Areas share. Details of the purchase consideration and the net assets acquired are as follows: $M Purchase consideration (refer to (b) below): Cash paid 1,262.5 Total purchase consideration 1,262.5 The provisionally accounted for assets and liabilities recognised as a result of the acquisition are as follows: Fair value $M Cash 94.0 Trade and other receivables 50.2 Inventories 48.2 Financial assets at fair value through profit or loss 1.6 Plant and equipment 70.1 Right-of-use assets 15.7 Mine properties 948.4 Exploration and evaluation expenditure 94.0 Financial assets at fair value through other comprehensive income 83.7 Trade and other payables (77.4) Current tax liabilities (2.1) Provisions (47.1) Lease liabilities (16.8) Net identifiable assets acquired 1,262.5 There were no business combinations in the year ending 30 June 2021. Revenue and profit contribution The acquired business did not contribute any revenue or profit or loss to the Group for the period. The Group has not disclosed pro-forma revenue and profit or loss for the combined entity for the year ended 30 June 2022 as though the acquisition date for the business combination occurred on 1 July 2021 because the Group is still working through the provisional accounting adjustments and harmonisation of accounting policies. Notes to the consolidated financial statements 30 June 2022 (continued) 23 Business combination (continued) (b) Purchase consideration - cash outflow 2022 $M 2021 $M Outflow of cash to acquire subsidiary, net of cash acquired Cash consideration 1,262.5 - Less: Balances acquired Cash (94.0) - Net outflow of cash - investing activities 1,168.5 - Acquisition-related costs Acquisition and other integration related costs of $65.8 million are included in acquisition and transaction costs in the profit or loss and an amount of $2.5 million is included in operating cash flows in the statement of cash flows. (c) Recognition and measurement The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the fair value of the assets transferred, liabilities incurred and the equity interests issued by the Group. The consideration transferred also includes the fair value of any asset or liability resulting from a contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary. Acquisition-related costs are expensed as incurred. On the acquisition of a business, the Group assesses the financial assets acquired and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic conditions, the Group's operating or accounting policies and other pertinent conditions in existence at the acquisition date. The excess of the consideration transferred and the amount of any non-controlling interest in the acquiree over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the subsidiary acquired and the measurement of all amounts has been reviewed, the difference is recognised directly in profit or loss as a discount on acquisition. Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the provisional amounts recognised and also recognises additional assets or liabilities during the measurement period, based on new information obtained about the facts and circumstances that existed at the acquisition date. The measurement period ends on either the earlier of (i) 12 months from the date of the acquisition or (ii) when the acquirer receives all the information possible to determine fair value. (d) Key estimates and judgements As discussed above, business combinations are initially accounted for on a provisional basis. Estimates and judgements are required by the Group, taking into consideration all available information at the reporting date, to assess the fair value of assets acquired, liabilities and contingent liabilities assumed. Fair value adjustments on the finalisation of the business combination accounting is retrospective, where applicable, to the period the combination occurred and may have an impact on the assets, liabilities, depreciation and amortisation reported. Notes to the consolidated financial statements 30 June 2022 Notes to the consolidated financial statements 30 June 2022 136 — IGO ANNUAL REPORT 2022 IGO ANNUAL REPORT 2022 — 137
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