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CMA Final · Corporate Financial Reporting · Accounting and Reporting of Joint Operation

Prakash Ltd and Quest Ltd are both wholly owned subsidiaries of Raman Ltd, the ultimate parent. Prakash acquires an interest in a joint operation that is a business, in which Quest already has joint control. Raman controls all the parties both before and after the acquisition, and the control is not transitory. Which accounting applies to this acquisition under Ind AS 111?

The accounting specified in Appendix C of Ind AS 103 applies. Because all the parties sharing joint control are under the same ultimate controlling party both before and after the acquisition, and that control is not transitory, the normal acquisition accounting for interests in joint operations is excluded.

  1. AThe acquisition-method principles of Ind AS 103 for business combinations apply, as in a normal acquisition
  2. BThe accounting specified in Appendix C of Ind AS 103 appliesCorrect
  3. CThe interest is recorded at fair value, with goodwill recognised
  4. DNo accounting is required until the joint operation earns revenue

Explanation

The business-combination accounting for acquiring an interest in a joint operation does not apply where the parties sharing joint control are under the common control of the same ultimate controlling party both before and after the acquisition, and that control is not transitory. For such transactions, the accounting specified in Appendix C of Ind AS 103 applies. The fair value and goodwill treatment is the one that this common control exception excludes.

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