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

Mr. Raghavan, an individual who is not subject to Ind AS reporting, holds 70% of Alpha Ltd and 55% of Beta Ltd. Alpha Ltd proposes to take over the business of Beta Ltd. The two companies are not part of any single consolidated financial statements. Under Appendix C of Ind AS 103, how should the combination be viewed?

It is a common control business combination. Appendix C of Ind AS 103 says an individual may control entities without being subject to Ind AS, and the combining entities need not be part of the same consolidated financial statements for the combination to qualify.

  1. AIt is a common control business combination, because an individual can control both entities and combining entities need not be in the same consolidated financial statementsCorrect
  2. BIt is not a common control combination, because Mr. Raghavan is not subject to Ind AS reporting
  3. CIt is not a common control combination, because Beta Ltd has a 45% non-controlling interest
  4. DIt is not a common control combination, because Alpha Ltd and Beta Ltd are not in the same consolidated financial statements

Explanation

Appendix C states that an entity can be controlled by an individual, who may not be subject to Ind AS, and that combining entities need not be in the same consolidated financial statements for the combination to be under common control. Mr. Raghavan controls both companies with holdings above 50%. Options citing his reporting status or the separate consolidation are therefore wrong.

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