Skip to content

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

Gamma Ltd was generating revenue from external customers when Delta Ltd acquired its operations on 1 October. Delta plans to integrate the operations fully so that from the next year no revenue will be earned from external customers. In assessing the presence of outputs under Ind AS 103 Appendix B, how should the acquired set be viewed?

The set is considered to have outputs at the acquisition date because it was generating revenue then. Ind AS 103 says this holds even if the acquirer will later integrate it and stop external revenue, since the test is applied at the acquisition date.

  1. AIt has no outputs because revenue will cease after integration
  2. BIt is considered to have outputs at the acquisition date because it was generating revenue thenCorrect
  3. COutputs are judged only by the revenue expected in the year after acquisition
  4. DIt has outputs only if Delta continues external sales for at least three years

Explanation

Ind AS 103 states that if an acquired set was generating revenue at the acquisition date, it is considered to have outputs at that date, even if later it will not generate revenue from external customers because the acquirer integrates it. The assessment is made at the acquisition date, so Delta's later plan does not change it.

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