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CS Professional · Corporate Restructuring, Valuation and Insolvency · Accounting in Corporate Restructuring: Concept and Accounting Treatment

Tapti Ltd acquires a business on 1 April. It pays Rs 50 crore consideration. Separately it pays Rs 1.2 crore to advisers for legal and due diligence services connected with the deal. The identifiable net assets acquired at fair value are Rs 44 crore. How much goodwill does Tapti Ltd recognise under Ind AS 103?

Goodwill is Rs 6 crore, being Rs 50 crore consideration less Rs 44 crore fair value of net identifiable assets. Under Ind AS 103, acquisition-related costs such as legal and due diligence fees are expensed when incurred and are excluded from the consideration used for goodwill.

  1. ARs 6 croreCorrect
  2. BRs 7.2 crore
  3. CRs 4.8 crore
  4. DRs 5.2 crore

Explanation

Goodwill = consideration transferred minus fair value of identifiable net assets = 50 - 44 = Rs 6 crore. Acquisition-related costs are expensed in the period incurred and are not part of consideration. Adding the Rs 1.2 crore gives Rs 7.2 crore, which wrongly capitalises those costs.

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