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

Asha Ltd and Bharat Ltd are both wholly owned subsidiaries of Kaveri Holdings Ltd. Asha Ltd takes over the entire business of Bharat Ltd. Under Appendix C of Ind AS 103, how should this combination be accounted for?

The combination is accounted for using the pooling of interests method. Appendix C of Ind AS 103 requires business combinations of entities or businesses under common control to use pooling, and Asha and Bharat are both subsidiaries of Kaveri Holdings, so the acquisition method does not apply.

  1. APooling of interests method, as the entities are under common controlCorrect
  2. BAcquisition method, with identifiable assets and liabilities measured at fair value
  3. CAcquisition method, with goodwill recognised for any excess consideration
  4. DFair value method, with a bargain purchase gain recognised in profit or loss

Explanation

Appendix C requires business combinations involving entities or businesses under common control to be accounted for using the pooling of interests method. Both companies are controlled by Kaveri Holdings Ltd, so the acquisition method with fair values and goodwill does not apply.

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