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

Rudra Ltd and Sindhu Ltd are both wholly owned subsidiaries of Vishwa Ltd, and the three entities with another group company jointly control a joint operation that is a business. Rudra Ltd acquires an interest in the joint operation from another group entity. Vishwa Ltd controls all parties both before and after the acquisition, and that control is not transitory. Which accounting applies to this acquisition?

Appendix C of Ind AS 103 applies. Since all parties sharing joint control are under the common control of the same ultimate controlling party before and after the acquisition, and that control is not transitory, the usual business combination principles for joint operations do not apply.

  1. AAppendix C of Ind AS 103 applies, as the parties are under common controlCorrect
  2. BParagraphs 21A and B33A-B33C apply, applying Ind AS 103 acquisition method principles
  3. CAcquisition is recorded at fair value with goodwill recognised in profit or loss
  4. DAcquisition is ignored until the joint operation resells its assets

Explanation

Ind AS 111 (B33D) states that paragraphs 21A and B33A-B33C do not apply where all parties sharing joint control, including the acquirer, are under common control of the same ultimate controlling party both before and after, and control is not transitory. Accounting follows Appendix C of Ind AS 103. The acquisition method option is therefore wrong.

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