Skip to content

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

Mr. Raman Iyer holds 100% of Alpha Ltd and 60% of Beta Ltd; the remaining 40% of Beta Ltd is held by unrelated investors. Alpha Ltd acquires the business of Beta Ltd. Under Appendix C of Ind AS 103, how should the combination be viewed?

It is a common control combination. Ind AS 103 Appendix C says the extent of non-controlling interests in the combining entities is irrelevant, because a partially-owned subsidiary is still under the controller's control. Mr. Iyer controls both companies, so the outsiders' 40% holding in Beta does not change the result.

  1. ANot a common control combination, because 40% of Beta Ltd is held by outsiders
  2. BA common control combination, because non-controlling interests in a partially-owned entity are not relevant to the testCorrect
  3. CA common control combination only if the outsiders approve the transaction
  4. DNot a common control combination, because Mr. Iyer is an individual and not a reporting entity

Explanation

Appendix C states that the extent of non-controlling interests in each combining entity before and after the combination is not relevant, since a partially-owned subsidiary is still under the parent's control. Mr. Iyer controls both Alpha and Beta, so common control exists. The option citing the 40% outside holding applies the very factor the standard says to ignore.

Did you get it right without looking?

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

Practise Business Combination under Common ControlFree diagnostic mock

More Business Combination under Common Control questions