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CMA Final · Corporate Financial Reporting · Accounting for Business Combination and Restructuring

Rudra Ltd holds 60% voting rights in Sindhu Ltd, but minority veto rights previously prevented Rudra from controlling Sindhu. Those veto rights now lapse, and Rudra transfers no consideration. Under Ind AS 103, how is this event treated?

It is a business combination accounted for by the acquisition method. Ind AS 103 lists the lapse of minority veto rights that previously prevented control as a case where control is obtained without consideration, and the acquisition method still applies.

  1. AIt is not a business combination because no consideration was transferred
  2. BIt is a business combination and the acquisition method appliesCorrect
  3. CIt is a common control combination accounted for by pooling of interests
  4. DIt is a business combination accounted for at carrying amounts only

Explanation

Ind AS 103 states that an acquirer sometimes obtains control without transferring consideration, and that the acquisition method applies. Lapse of minority veto rights that previously kept the acquirer from controlling is a listed example. Absence of consideration therefore does not exclude it.

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