Skip to content

CA Final · Financial Reporting · Ind AS 103 Business Combinations

Bharat Engineering Ltd acquires 70% of Narmada Castings Ltd for ₹140 crore cash and obtains control. Narmada's identifiable net assets have a fair value of ₹180 crore. The fair value of the 30% non-controlling interest is ₹66 crore, and Bharat elects to measure NCI at fair value. Bharat also pays ₹3 crore of legal and advisory fees for the acquisition. What goodwill does Bharat recognise at the acquisition date?

Goodwill is ₹26 crore. It is the consideration of ₹140 crore plus the fair value of NCI of ₹66 crore, less identifiable net assets of ₹180 crore. The ₹3 crore acquisition costs are expensed and are excluded from the goodwill computation.

  1. A₹29 crore, by including the acquisition costs
  2. B₹14 crore, by measuring NCI at its proportionate share
  3. C₹26 croreCorrect
  4. D₹17 crore, by measuring NCI proportionately and adding the costs

Explanation

Goodwill = consideration 140 + NCI at fair value 66 − net identifiable assets 180 = ₹26 crore. Acquisition-related costs are expensed in the period and are not part of the consideration. Including them gives ₹29 crore, which is wrong. Using the proportionate NCI of 30% × 180 = ₹54 crore gives ₹14 crore, which is not the election made.

Did you get it right without looking?

One question tells you little. A timed set on Ind AS 103 Business Combinations shows your real accuracy, how long you take and where you lose marks.

Practise Ind AS 103 Business CombinationsFree diagnostic mock

More Ind AS 103 Business Combinations questions