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

Transferor Ltd has General Reserve ₹50 lakh, Capital Reserve ₹10 lakh and Revaluation Reserve ₹15 lakh. It is merged into Transferee Ltd in a common control combination accounted under Appendix C of Ind AS 103. Which statement about the reserves in Transferee's books is correct?

The transferee preserves the identity of reserves: General Reserve stays General Reserve, Capital Reserve stays Capital Reserve and Revaluation Reserve stays Revaluation Reserve. Consequently reserves available for dividend before the combination remain available for dividend afterwards.

  1. AAll reserves are merged into a single capital reserve of ₹75 lakh
  2. BThe reserves are eliminated against the investment in Transferor
  3. COnly the General Reserve is carried forward; others are written off
  4. DThe General, Capital and Revaluation Reserves are retained in the same form, so reserves distributable earlier remain distributableCorrect

Explanation

Appendix C requires the identity of the reserves to be preserved in the same form in the transferee. General Reserve stays General Reserve, Capital Reserve stays Capital Reserve and Revaluation Reserve stays Revaluation Reserve. Reserves available for dividend before the combination remain available afterwards.

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