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

Alpha Ltd and Beta Ltd are under common control. Alpha absorbs Beta, issuing shares with total nominal value of ₹60 lakh to Beta's shareholders and paying no other consideration. Beta's share capital is ₹80 lakh. How is the difference treated in Alpha's books under Appendix C of Ind AS 103?

The ₹20 lakh difference between Beta's share capital of ₹80 lakh and the ₹60 lakh of Alpha shares issued is transferred to capital reserve. It must be presented separately from other capital reserves, with disclosure of its nature and purpose in the notes.

  1. A₹20 lakh credited to capital reserve, presented separately from other capital reservesCorrect
  2. B₹20 lakh recognised as goodwill
  3. C₹20 lakh debited to the statement of profit and loss
  4. D₹20 lakh credited to securities premium

Explanation

The difference between share capital issued plus any additional consideration (₹60 lakh) and the transferor's share capital (₹80 lakh) is ₹20 lakh. Appendix C says this is transferred to capital reserve and presented separately from other capital reserves with disclosure of its nature and purpose. Goodwill is wrong because pooling does not recognise new assets.

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