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

Meghdoot Ltd and Sundaram Ltd are both controlled by the same promoter group before and after the merger, so the merger is a common control business combination under Ind AS 103 Appendix C. How should Meghdoot Ltd (transferee) record the assets and liabilities of Sundaram Ltd?

Under the pooling of interests method required for common control combinations, the transferee records the transferor's assets and liabilities at carrying amounts. It makes no fair value adjustments and recognises no new assets or liabilities. The only adjustments allowed are those needed to harmonise accounting policies.

  1. AAt their fair values on the date of combination, recognising goodwill or capital reserve
  2. BAt their carrying amounts, with adjustments only to harmonise accounting policiesCorrect
  3. CAt their carrying amounts, increased by internally generated intangible assets not previously recognised
  4. DAt fair values for assets and carrying amounts for liabilities

Explanation

Appendix C requires the pooling of interests method. Assets and liabilities are reflected at carrying amounts, and no fair value adjustments or new assets or liabilities are recognised. The only permitted adjustment is to harmonise accounting policies. Fair value measurement belongs to the acquisition method, which does not apply here.

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