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

Two subsidiaries of Bharat Holdings Ltd, Alpha Ltd and Beta Ltd, jointly control a joint operation that is a business. Bharat Holdings controls both before and after the acquisition, and the control is not transitory. Alpha acquires a further interest in the joint operation. Which accounting applies to this acquisition?

Appendix C of Ind AS 103 applies. Because the parties sharing joint control, including the acquirer, are under the common control of the same ultimate controlling party before and after the acquisition, and that control is not transitory, the usual acquisition accounting in paragraphs 21A and B33A-B33C is excluded.

  1. AAppendix C of Ind AS 103 applies, not the business combination accounting in paragraphs 21A and B33A-B33CCorrect
  2. BAcquisition-method accounting under paragraph 21A applies in full
  3. CThe interest is recorded at fair value with goodwill recognised
  4. DThe acquisition is ignored until the joint operation is wound up

Explanation

Paragraphs 21A and B33A-B33C do not apply when the parties sharing joint control, including the acquirer, are under common control of the same ultimate controlling party both before and after the acquisition and the control is not transitory. Appendix C of Ind AS 103 applies instead. Acquisition-method accounting is therefore wrong here.

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