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CMA Final · Corporate Financial Reporting · Accounting for Business Combination and Restructuring

Gomti Ltd merges with Hasti Ltd in a common control combination accounted for using pooling of interests. The merger takes place on 1 October 2026. The financial year ends on 31 March 2027, and the earliest comparative period is the year ended 31 March 2026. Hasti Ltd's General Reserve is ₹5,00,000 and its Revaluation Reserve is ₹2,00,000. Which treatment is correct?

Both reserves retain their identity in Gomti's books, and prior period information is restated as if the combination occurred from the beginning of the preceding period, 1 April 2025. This follows Appendix C of Ind AS 103, since the actual combination date is later.

  1. ABoth reserves are merged into Gomti Ltd's retained earnings, and comparatives are not restated
  2. BBoth reserves keep their identity in Gomti Ltd, and the comparatives are restated from the beginning of the preceding period, i.e. 1 April 2025Correct
  3. CHasti's reserves are eliminated against capital reserve, and comparatives are restated only from 1 October 2026
  4. DRevaluation Reserve is transferred to General Reserve, and comparatives are restated from 1 April 2025

Explanation

Reserves retain their identity: General Reserve stays General Reserve and Revaluation Reserve stays Revaluation Reserve. Prior period information is restated as if the combination occurred from the beginning of the preceding period (1 April 2025), since the combination occurred after that date.

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