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CA Final · Financial Reporting · Ind AS 1 Presentation of Financial Statements

Ganga Pharma Ltd acquired a business in a bargain purchase and, under Ind AS 103, recognised the gain directly in equity as capital reserve. While preparing the statement of changes in equity, the accountant asks how Ind AS 1 treats this item in the reconciliation of each component of equity. What is the correct position?

The reconciliation of each component of equity must include the recognition of the bargain purchase gain. Ind AS 1 paragraph 106(d)(iv) was amended for this, aligning with the Ind AS 103 treatment of such gains, so the statement of changes in equity should show it.

  1. AInd AS 1 para 106(d)(iv) was amended so that the reconciliation of each equity component includes recognition of bargain purchase gain on business combinationCorrect
  2. BThe gain is shown only in the Statement of Profit and Loss and not in equity reconciliation
  3. CThe gain is disclosed only in notes on contingent liabilities
  4. DThe reconciliation excludes the gain because it is a non-cash item

Explanation

The comparison with IAS 1 states that paragraph 106(d)(iv) was amended to include disclosure of recognition of bargain purchase gain arising on business combination, in line with Ind AS 103. Hence it appears in the equity component reconciliation. The profit and loss option contradicts the Ind AS 103 treatment described.

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