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CS Professional · Corporate Restructuring, Valuation and Insolvency · Accounting in Corporate Restructuring: Concept and Accounting Treatment

Asha Ltd and Bela Ltd are both wholly owned subsidiaries of Charu Holdings Ltd. Asha Ltd merges into Bela Ltd under a court-approved scheme. Under Ind AS 103 Appendix C, how should Bela Ltd account for this combination?

Bela Ltd should use the pooling of interests method. Both entities are controlled by the same parent before and after the merger, so Appendix C of Ind AS 103 applies. Assets and liabilities are carried at book values, with no fair valuation and no new goodwill.

  1. AAcquisition method, recording Asha's assets at fair value
  2. BPooling of interests methodCorrect
  3. CPurchase method with goodwill recognised at fair value
  4. DEquity method with only the share of profit recorded

Explanation

Both companies are under common control of Charu Holdings before and after the merger. Appendix C of Ind AS 103 requires the pooling of interests method for such combinations, not the acquisition method. Fair value recognition and new goodwill are features of the acquisition method and do not apply here.

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