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CA Final · Integrated Business Solutions (Multidisciplinary Case Study with Strategic Management) · Financial Reporting

Case: Veda Industries Ltd. acquired 70% of Sagar Components Ltd. on 1 April 2024 and obtains control. Sagar's net identifiable assets at fair value on that date were Rs 400 lakh. Veda paid Rs 330 lakh. Veda elects to measure non-controlling interest (NCI) at its proportionate share of net identifiable assets. What is the goodwill in the consolidated financial statements on acquisition?

Goodwill is Rs 50 lakh. With NCI at proportionate share of net identifiable assets, NCI is 30% of Rs 400 lakh, i.e. Rs 120 lakh. Adding consideration of Rs 330 lakh gives Rs 450 lakh, and deducting net assets of Rs 400 lakh leaves Rs 50 lakh.

  1. ARs 50 lakhCorrect
  2. BRs 30 lakh
  3. CRs 90 lakh
  4. DRs 10 lakh

Explanation

NCI at proportionate share = 30% x 400 = Rs 120 lakh. Goodwill = consideration 330 + NCI 120 - net assets 400 = Rs 50 lakh. Rs 30 lakh results from ignoring NCI and using 70% of net assets (280) incorrectly as 330-280 = 50, so is wrong; Rs 90 lakh adds NCI to wrong base.

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