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

Under Appendix C of Ind AS 103, which method of accounting applies to a business combination involving entities under common control?

Business combinations of entities under common control are accounted for using the pooling of interests method under Appendix C of Ind AS 103. Assets and liabilities are carried at existing carrying amounts, not fair values, and no goodwill arises from the combination.

  1. AAcquisition method, with assets and liabilities at fair value
  2. BPooling of interests methodCorrect
  3. CEquity method, with the investment carried at cost plus share of profit
  4. DPurchase method, with goodwill recognised on the difference in consideration

Explanation

Appendix C states that business combinations involving entities or businesses under common control shall be accounted for using the pooling of interests method. The acquisition method is used for other business combinations, where the acquirer obtains control and fair values are applied. Using it for common control deals would be wrong.

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