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CA Final · Financial Reporting · Ind AS 103 Business Combinations

Himalaya Power Ltd, the parent, holds 100% of both Ganga Hydro Ltd and Yamuna Solar Ltd. It decides to transfer its entire holding in Yamuna Solar to Ganga Hydro in exchange for Ganga Hydro's shares. The parent controls both entities before and after the transfer. How should Ganga Hydro's accounting for this combination be approached under the Ind AS framework?

Ganga Hydro should follow Appendix C of Ind AS 103. Both entities are controlled by the same parent before and after the transfer, so it is a common control combination. IFRS 3 excludes these, and Ind AS 103 gives specific guidance for them instead of the acquisition method.

  1. AApply the acquisition method of Ind AS 103 and recognise goodwill
  2. BApply the acquisition method but recognise any gain in profit or loss
  3. CFollow the guidance in Appendix C of Ind AS 103 for business combinations of entities under common controlCorrect
  4. DApply Ind AS 101 because the transaction is a first-time adoption event

Explanation

IFRS 3 excludes business combinations of entities under common control. Ind AS 103 modifies its scope paragraph and gives the guidance for such combinations in Appendix C. Here Himalaya controls both entities before and after the transfer, so the combination is a common control combination and the acquisition method does not apply as such.

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