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CMA Final · Corporate Financial Reporting · Accounting for Business Combination and Restructuring

Alpha Ltd and Beta Ltd are both wholly owned subsidiaries of Sigma Ltd. Alpha Ltd absorbs the business of Beta Ltd in a common control combination. Under Appendix C of Ind AS 103, how are the assets and liabilities of Beta Ltd recorded in the books of Alpha Ltd?

Assets and liabilities of the transferor are recorded at their carrying amounts. Under the pooling of interests method required for common control combinations, no fair value adjustments or new assets or liabilities are recognised; only accounting policies are harmonised.

  1. AAt their carrying amounts, with adjustments only to harmonise accounting policiesCorrect
  2. BAt their fair values on the date of combination, with goodwill recognised
  3. CAt their fair values, with any gain taken to profit or loss
  4. DAt their carrying amounts, revalued upwards to the purchase consideration

Explanation

Appendix C requires the pooling of interests method for common control combinations. Assets and liabilities are reflected at carrying amounts and no fair value adjustments are made. The only adjustments allowed are to harmonise accounting policies. Fair value recording is the acquisition method and does not apply here.

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