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CA Final · Financial Reporting · Ind AS 12 Income Taxes

On 1 April 2025, Dhruv Ltd acquires 100% of Eshan Ltd for ₹1,10,00,000 in a business combination. The fair value of Eshan's identifiable assets net of liabilities, before any deferred tax, is ₹1,00,00,000. This includes plant with fair value ₹50,00,000 and tax base ₹40,00,000. All other items have tax base equal to fair value. The tax rate is 25%. Applying Ind AS 12 and Ind AS 103, what goodwill is recognised?

Goodwill is ₹12,50,000. A deferred tax liability of ₹2,50,000 arises on the ₹10,00,000 fair value uplift of the plant, reducing net identifiable assets to ₹97,50,000. Goodwill is the ₹1,10,00,000 consideration less this amount. No deferred tax liability is recognised on the goodwill itself.

  1. A₹12,50,000Correct
  2. B₹10,00,000
  3. C₹7,50,000
  4. D₹15,62,500

Explanation

The plant gives a taxable temporary difference of 10,00,000, so a DTL of 2,50,000 is recognised in the acquisition accounting. Net identifiable assets become 97,50,000. Goodwill is 1,10,00,000 - 97,50,000 = 12,50,000. No DTL is recognised on the goodwill itself, so 15,62,500 is wrong, and 10,00,000 ignores the DTL.

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