Skip to content

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

Ravi Family Trust-like arrangement: Mr. Ravi and his brother Mr. Sanjay, under a contractual arrangement to act together, control both Kiran Ltd and Lakshmi Ltd. Neither individual prepares Ind AS financial statements and the two companies are not part of any consolidated financial statements. Kiran Ltd absorbs Lakshmi Ltd. Under Appendix C of Ind AS 103, how should the combination be treated?

It is a common control combination. Appendix C says a group of individuals acting together under a contractual arrangement can control entities even if they are not subject to Ind AS, and the combining entities need not appear in the same consolidated financial statements for common control to exist.

  1. AAs an acquisition under the acquisition method, because no consolidated financial statements include both companies
  2. BAs a common control combination, because control by a group of individuals acting together under a contractual arrangement sufficesCorrect
  3. CAs a common control combination only if Mr. Ravi and Mr. Sanjay prepare Ind AS financial statements
  4. DAs outside the scope of Ind AS 103 altogether

Explanation

Appendix C says an entity can be controlled by an individual or by a group of individuals acting together under a contractual arrangement, who may not be subject to Ind AS reporting. It is therefore not necessary for the combining entities to be in the same consolidated financial statements. Hence the pooling of interests method applies, and the acquisition-method option is wrong.

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