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CA Final · Financial Reporting · Ind AS 103 Business Combinations

Ind AS 103 differs from IFRS 3 in the treatment of a bargain purchase gain. Anand Ltd acquires a business and, after reassessment, finds net identifiable assets exceed consideration, with clear evidence that the purchase was a bargain purchase (a distress sale). Where does Anand Ltd recognise the gain under Ind AS 103?

Anand Ltd recognises the gain in other comprehensive income and accumulates it in equity as capital reserve. Ind AS 103 departs from IFRS 3, which takes the gain to profit or loss. Because the reason is clearly evidenced as a bargain purchase, the direct-to-equity route is not used.

  1. AIn profit or loss as other income
  2. BDirectly in retained earnings
  3. CIn other comprehensive income and accumulate in equity as capital reserveCorrect
  4. DAs a deduction from the carrying amount of non-current assets acquired

Explanation

Ind AS 103 requires a bargain purchase gain to be recognised in OCI and accumulated in equity as capital reserve where there is clear evidence of the reason. IFRS 3 would use profit or loss, which is the key distractor. Direct recognition in equity applies only when clear evidence is lacking.

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