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CA Final · Financial Reporting · Ind AS 40 Investment Property

Ganga Infra Ltd acquires a company whose main assets are two office buildings let to tenants, along with processes and staff to manage the leases. How should the acquisition be assessed under Ind AS 40?

Whether the acquisition is a business combination must be determined by applying Ind AS 103, not Ind AS 40. Paragraphs 7 to 14 of Ind AS 40 only distinguish investment from owner-occupied property, so where a transaction includes investment property both Standards are applied separately.

  1. AAutomatically an asset acquisition because the buildings are investment property
  2. BAutomatically a business combination because staff are acquired
  3. CJudgement is needed; Ind AS 103 determines whether it is a business combination, and both Standards are applied separatelyCorrect
  4. DInd AS 40 alone decides, as paragraphs 7 to 14 cover business combinations

Explanation

Paragraph 14A says judgement is needed on whether an acquisition is an asset, group of assets or business combination, with reference to Ind AS 103. Paragraphs 7-14 only address owner-occupied versus investment property. Where both apply, the Standards are applied separately, so neither automatic conclusion is right.

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