On November 1, 2023, a newly incorporated subsidiary of the Company, Paola Confectii Manufacturing Limited (“Paola Confectii”), acquired the business of Paola Confectii SRL, a luxury knitwear manufacturer for total cash consideration of $15.9m. This acquisition is expected to enhance product margins and supply control, while deepening in-house product expertise and capability.

Management determined that the assets and substantive processes comprised a business and therefore accounted for the transaction as a business combination under IFRS 3, Business Combinations using the acquisition method of accounting. Under the acquisition method, assets and liabilities of the acquiree are recorded at their fair values.


			$
Assets acquired
Trade receivables			7.2
Inventories			1.6
Prepaid expenses			0.1
Property, plant and equipment			2.6
Intangible assets
Customer list			3.5
Brand			1.0
Right-of-use assets			1.2
Goodwill			8.3
Accounts payable and accrued liabilities			(8.4)
Lease liability			(1.2)
Total assets acquired, net of liabilities assumed			15.9

The determination of the fair value of assets acquired and liabilities assumed is based on estimates and certain assumptions with respect to the fair values of the assets acquired and liabilities assumed that were finalized as at the reporting date, within one year of the acquisition.

Goodwill of $8.3m was recognized as the excess of the acquisition cost over the fair value of net identifiable assets at the date of acquisition. Goodwill is mainly attributable to the strengthening of our vertically integrated supply chain and expected future growth potential of the knitwear category. Goodwill recognized is not expected to be deductible for income tax purposes.

Identifiable intangible assets acquired consist of the customer list and brand. The fair value of the customer list was $3.5m, measured using the multi-period excess earnings method, which will be amortized over a 4-year period on a straight-line basis. The fair value of the brand was $1.0m, measured using the relief-from-royalty method.

In connection with the business combination, subject to the controlling shareholders of Paola Confectii SRL ("PCML Vendors") remaining employees through November 1, 2025, a further amount is payable to the PCML Vendors if certain performance conditions are met based on financial results (“Earn-Out”). The estimated value is calculated as a pre-determined percentage of net equity value, determined as a multiple of EBITDA and EBITDA margin for the fiscal year ending March 30, 2025, subject to a floor, less net debt adjustments. As at the reporting date, the estimated value of the payout was $7.4m. The Company recognized the amount payable to the PCML Vendors as a separate transaction that was not included in applying the acquisition method as the amount reflects remuneration for future services to be performed conditional on employment until November 1, 2025, and therefore this amount will be expensed over two years.

The Company incurred $0.8m in transaction related costs which are included in SG&A expenses in the consolidated statements of income and comprehensive income for the year ended March 31, 2024.

Paola Confectii’s results are consolidated into the Company’s financial results effective from the date of acquisition and are presented in the Company’s Other operating segment. The results of Paola Confectii were not significant for the period beginning on the date of acquisition and ended on March 31, 2024 and would not have been either during fiscal 2024 if the acquisition had occurred as of the beginning of the fiscal year.

The PCML Vendors are employed as members of key management and continue to lead and maintain regular operations at Paola Confectii. The Earn-Out to the PCML Vendors and transactions with one of the PCML Vendors in connection with the acquisition for the lease of the manufacturing facility are related party transactions as they have been retained as employees of the Company. See “Note 20. Related Party Transactions” for more details.

The Company and a former distributor of the Company's products in Japan, Sazaby League, Ltd. ("Sazaby League"), entered into an agreement (the "Joint Venture Agreement") to form a joint venture (the “Japan Joint Venture”) pursuant to which the Company acquired 50% of the issued and outstanding voting shares of the legal entity comprising the joint venture, Canada Goose Japan, K.K. (“CG Japan”), on April 4, 2022. CG Japan was established to market, distribute and sell Canada Goose products, and to operate retail stores and e-Commerce in Japan.

Prior to the establishment of CG Japan, the Company sold its products to Sazaby League. The majority of sales historically occurred in the first and second quarters and were recorded in the Wholesale operating segment. Subsequent to the transaction, the Company has consolidated the results of CG Japan and revenue and results of operations will be aligned to the respective operating segments and are expected to occur more in line with the seasonality of the Company's Wholesale and DTC segments.

Management performed an analysis under IFRS 10, Consolidated Financial Statements and since the Company has the power to direct the relevant activities of CG Japan, is exposed to variable returns, and can use its power to influence those returns, management determined that the Company has control over CG Japan for accounting purposes. In addition, management performed an analysis under IFRS 3, Business Combinations and has determined that the Company is the acquirer of CG Japan. Management determined that the assets and processes acquired comprised a business and therefore, accounted for the transaction as a business combination using the acquisition method of accounting. Under the acquisition method, assets and liabilities of the acquiree are recorded at their fair values.

The Company paid cash consideration to CG Japan of JPY250.0m ($2.6m) plus deferred contingent consideration to the non-controlling shareholder with an estimated fair value of JPY1,958.9m ($20.0m) resulting in total consideration of JPY2,208.9m ($22.6m). The deferred contingent consideration is payable if an agreed cumulative adjusted EBIT target is not reached through the period ended June 30, 2026. The fair value of the applicable contingent consideration is determined based on the estimated financial outcome and the resulting expected contingent consideration to be paid, discounted using an appropriate rate. As at April 4, 2022, the contingent consideration amount was recorded in other long-term liabilities. The amount of contingent consideration is remeasured at its fair value each reporting period, with changes in fair value recorded in the consolidated statements of income and comprehensive income.

The Company incurred $1.3m in transaction related costs which are included in SG&A expenses in the consolidated statements of income and consolidated statements of comprehensive income for the year ended April 2, 2023. For the year ended April 3, 2022, the Company incurred $0.7m in transaction related costs.


			$
Assets acquired
Cash			5.4
Inventories			27.3
Property, plant and equipment			1.2
Intangible assets			14.9
Right-of-use assets			3.3
Goodwill			10.8
Other assets			2.4
			65.3
Liabilities assumed
Bank loan			19.4
Lease liabilities			3.2
Warranty provision			0.3
			22.9

Total identifiable net assets acquired			42.4
Less: Deferred tax liability			(8.1)
Less: Non-controlling interests			(11.7)
Net assets acquired			22.6

Consideration
Cash paid			2.6
Contingent consideration			20.0
Total purchase consideration			22.6

Cash consideration paid			(2.6)
Plus: Cash balance acquired			5.4
Net cash inflow on business combination			2.8

Goodwill is calculated as the difference between total consideration and the fair value of the net assets acquired and is attributable to expected synergies between CG Japan and the Company’s existing operations. Goodwill of $10.8m was recognized as the excess of the acquisition cost over the fair value of net identifiable assets at the date of acquisition. Goodwill recognized is not expected to be deductible for income tax purposes. Intangible assets of $14.9m relate to the fair value of the customer list and reacquired distribution rights of the Japan market, which will be amortized over a 10-year period.

The fair value of property, plant and equipment and right-of-use assets was based on management’s assessment of the acquired assets’ condition, as well as an evaluation of the current market value for such assets. In addition, the Company considered the length of time over which the economic benefit of these assets is expected to be realized and estimated the useful life of such assets as of the acquisition date. The fair value of inventories has been measured at net realizable value, less cost to sell.

CG Japan’s results are consolidated into the Company’s financial results effective April 4, 2022. For the year ended April 2, 2023, CG Japan contributed approximately $54.0m to the Company’s consolidated revenue and $1.0m to the Company’s operating income.

In connection with the business combination, the Joint Venture Agreement includes a put option that allows the non-controlling shareholder to sell its 50% interest to the Company within six months after certain circumstances constituting a "put option trigger" event occur. If the put option is not exercised during such six-month period, the put option will expire. The Company established a financial liability for the put option in respect of non-controlling interests. The fair value of the put option is classified as Level 3 within IFRS 13, Fair value measurement. As at April 4, 2022, the fair value of the put option held in Japanese yen by the non-controlling shareholder was recorded in other long-term liabilities in the amount of JPY2,076.4m ($21.2m).

The Company recorded the put option liability based on the present value of the amount expected to be paid to the non-controlling shareholder if exercised. Subsequently, the put option liability is adjusted to reflect changes in the present value of the amount that could be required to be paid at each reporting date, with fluctuations being recorded within the Company's consolidated statements of income, until it is exercised or expires.