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CMA Final · Corporate Financial Reporting · Business Combination under Common Control

Mr. Kabir Anand and Mr. Dev Anand, acting together under a contractual arrangement, jointly control Tara Ltd and Neel Ltd. Neither individual prepares financial statements under Ind AS, and Tara Ltd and Neel Ltd are not part of any consolidated financial statements. Tara Ltd now acquires the business of Neel Ltd. What is the correct treatment under Appendix C of Ind AS 103?

It is a common control combination accounted for using pooling of interests. Ind AS 103 Appendix C recognises that a group of individuals acting together under a contractual arrangement can control entities, and the combining entities need not be in the same consolidated financial statements for common control to exist.

  1. AIt is not a common control combination, because the combining entities are not in the same consolidated financial statements
  2. BIt is not a common control combination, because a group of individuals cannot exercise control
  3. CIt is a common control combination accounted for using pooling of interestsCorrect
  4. DIt is a common control combination accounted for using the acquisition method

Explanation

Appendix C says an entity can be controlled by an individual or by individuals acting together under a contractual arrangement who may not be subject to Ind AS. It is not necessary for the entities to be in the same consolidated financial statements. So this is a common control combination, and pooling of interests applies.

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