Skip to content

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

In a common control merger, the transferor company has General Reserve of Rs 8,00,000, Capital Reserve of Rs 2,00,000 and Revaluation Reserve of Rs 3,00,000. How should these reserves appear in the transferee's financial statements under Appendix C of Ind AS 103?

The reserves keep their identity and appear in the transferee in the same form as in the transferor's statements. General Reserve remains General Reserve, Capital Reserve remains Capital Reserve, and Revaluation Reserve remains Revaluation Reserve, so distributable reserves stay available for dividend.

  1. AEach in the same form, so General Reserve stays General Reserve and so on, preserving identityCorrect
  2. BAll merged into a single Capital Reserve of Rs 13,00,000
  3. CEliminated against the shares issued, with only the balance carried to retained earnings
  4. DGeneral Reserve shown as Securities Premium and the others as Capital Reserve

Explanation

The identity of the reserves is preserved, so they appear in the transferee in the same form as in the transferor. As a result, reserves available for dividend before the combination remain available afterwards. Merging them into capital reserve would lose this distributable character.

Did you get it right without looking?

One question tells you little. A timed set on Accounting for Business Combination and Restructuring shows your real accuracy, how long you take and where you lose marks.

Practise Accounting for Business Combination and RestructuringFree diagnostic mock

More Accounting for Business Combination and Restructuring questions