Skip to content

CMA Final · Corporate Financial Reporting · Absorptions, Amalgamations, External Reconstruction

Bharat Ltd acquires a set of activities and assets from Chetan Ltd. At the acquisition date the set was generating revenue from external customers, but Bharat will integrate it into its own operations so that no revenue will be earned from external customers after the date. Under Ind AS 103 (Appendix B, para B12A), how should the set be viewed regarding outputs?

The set is considered to have outputs at the acquisition date because it was generating revenue then. Ind AS 103 para B12A says this holds even if the acquirer's later integration means it will no longer earn revenue from external customers.

  1. AIt has no outputs because revenue will cease after integration
  2. BIt has outputs at the acquisition date because it was generating revenue then, even though external revenue will stop laterCorrect
  3. CWhether it has outputs depends only on the profit earned after integration
  4. DIt is treated as an early-stage entity without outputs

Explanation

Para B12A states that if an acquired set was generating revenue at the acquisition date, it is considered to have outputs at that date, even if it will subsequently no longer generate revenue from external customers, for example due to integration by the acquirer. Option A uses post-acquisition events, which the paragraph rules out.

Did you get it right without looking?

One question tells you little. A timed set on Absorptions, Amalgamations, External Reconstruction shows your real accuracy, how long you take and where you lose marks.

Practise Absorptions, Amalgamations, External ReconstructionFree diagnostic mock

More Absorptions, Amalgamations, External Reconstruction questions