Skip to content

CA Final · Financial Reporting · Ind AS 103 Business Combinations

Sunrise Textiles Ltd acquires control of Vastra Mills Ltd in a transaction. Which of the following best describes how Ind AS 103 treats a transaction commonly called a 'true merger' or 'merger of equals'?

A so-called true merger or merger of equals is a business combination under Ind AS 103, because the definition covers any transaction in which an acquirer obtains control of one or more businesses. The label used does not take it outside the Standard.

  1. AIt is excluded from Ind AS 103 because neither party is clearly the acquirer
  2. BIt is a business combination under Ind AS 103 because one party still obtains control of one or more businessesCorrect
  3. CIt is accounted for only under Ind AS 110 as a joint arrangement
  4. DIt is treated as a business combination only if the consideration is wholly in cash

Explanation

Ind AS 103 defines a business combination as a transaction or other event in which an acquirer obtains control of one or more businesses. It states that transactions sometimes called 'true mergers' or 'mergers of equals' are also business combinations as the term is used in the Standard. The exclusion option is wrong because the definition expressly includes them.

Did you get it right without looking?

One question tells you little. A timed set on Ind AS 103 Business Combinations shows your real accuracy, how long you take and where you lose marks.

Practise Ind AS 103 Business CombinationsFree diagnostic mock

More Ind AS 103 Business Combinations questions