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

Asha Textiles Ltd and Bharat Fabrics Ltd are both wholly owned subsidiaries of Kalyani Holdings Ltd. Asha Textiles absorbs Bharat Fabrics in a business combination. Under Appendix C of Ind AS 103, which method of accounting applies?

Pooling of interests applies. Because both companies are controlled by the same parent, Appendix C of Ind AS 103 requires the combination to be accounted for using pooling of interests, with assets and liabilities reflected at carrying amounts rather than fair values.

  1. AAcquisition method, with identifiable assets at fair value and goodwill recognised
  2. BPooling of interests method, with assets and liabilities at carrying amountsCorrect
  3. CAcquisition method, but with assets at carrying amounts and goodwill recognised
  4. DFair value method, with a bargain purchase gain taken to profit or loss

Explanation

Both entities are under common control of the same parent. Appendix C requires business combinations involving entities or businesses under common control to be accounted for using the pooling of interests method, so carrying amounts are used and no goodwill arises from fair valuation.

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