Skip to content

CMA Final · Corporate Financial Reporting · Business Combination under Common Control

Arjun Industries Ltd and Bhima Engineering Ltd are both controlled by a group of three individuals who act together under a contractual arrangement. The individuals are not subject to Ind AS. Arjun Industries absorbs Bhima Engineering. Which statement is correct under Ind AS 103 Appendix C?

The combination is under common control and uses pooling of interests. Ind AS 103 Appendix C recognises that a group of individuals acting together under a contractual arrangement can control entities, even if not subject to Ind AS, so inclusion in the same consolidated financial statements is unnecessary.

  1. ACommon control exists only if a single individual controls both entities
  2. BThe combination is a business combination under common control because a group of individuals acting together under a contractual arrangement can control an entity, and the entities need not be in the same consolidated financial statements; pooling of interests appliesCorrect
  3. CThe combination is accounted for under the acquisition method because the controlling parties are not subject to Ind AS reporting
  4. DCommon control is absent because the controlling parties do not prepare consolidated financial statements

Explanation

Appendix C says an entity can be controlled by an individual or by a group of individuals acting together under a contractual arrangement, who may not be subject to Ind AS. Hence it is not necessary for combining entities to be in the same consolidated financial statements. The pooling of interests method is therefore required.

Did you get it right without looking?

One question tells you little. A timed set on Business Combination under Common Control shows your real accuracy, how long you take and where you lose marks.

Practise Business Combination under Common ControlFree diagnostic mock

More Business Combination under Common Control questions