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

Himalaya Pharma Ltd, an Ind AS reporting entity, acquired a business and recognised a bargain purchase gain in equity as capital reserve under Ind AS 103. The CFO asks how Ind AS 1 treats this in the statement of changes in equity. Which statement is correct?

The reconciliation of each component of equity must include the bargain purchase gain from the business combination. Ind AS 1 paragraph 106(d)(iv) was amended for this, aligning with Ind AS 103, so the gain is disclosed within the statement of changes in equity.

  1. AInd AS 1 requires no disclosure because the gain goes directly to equity
  2. BThe gain is shown only as other comprehensive income and excluded from the reconciliation of equity
  3. CParagraph 106(d)(iv) is amended so the reconciliation of each component of equity includes recognition of the bargain purchase gain arising on business combinationCorrect
  4. DThe gain must be presented as an extraordinary item in the Statement of Profit and Loss

Explanation

Appendix 1 says paragraph 106(d)(iv), dealing with the reconciliation between opening and closing carrying amounts for each component of equity, was amended to include disclosure of bargain purchase gain on business combination, in line with Ind AS 103. Showing it in profit or loss as extraordinary is wrong because Ind AS does not permit extraordinary items and the gain goes to equity.

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