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CA Final · Financial Reporting · Ind AS 103 Business Combinations

Vikram Ltd acquires 100% of Nanda Ltd for ₹50 crore cash. Nanda's identifiable net assets have a fair value of ₹58 crore after a reassessment confirmed all items were correctly measured. Management has clear evidence of why the purchase was a bargain. Vikram incurred ₹1 crore of acquisition-related advisory fees. What amounts result under Ind AS 103?

The bargain purchase gain is ₹8 crore (58 less 50), recognised in other comprehensive income and accumulated as capital reserve; goodwill is nil. The ₹1 crore advisory fees are acquisition-related costs and are expensed, not included in the consideration transferred.

  1. AGoodwill ₹nil; ₹9 crore capital reserve through OCI; ₹1 crore fees expensed
  2. BGoodwill ₹nil; ₹8 crore capital reserve through OCI; ₹1 crore fees expensedCorrect
  3. CGoodwill ₹nil; ₹8 crore gain in profit or loss; ₹1 crore fees added to consideration
  4. DGoodwill ₹nil; ₹9 crore capital reserve through OCI; ₹1 crore fees added to consideration

Explanation

Gain = 58 − 50 = ₹8 crore, recognised in OCI and accumulated as capital reserve because evidence is clear. Acquisition-related costs are not part of consideration transferred and are expensed. Adding ₹1 crore to consideration or netting it wrongly gives ₹9 crore in the first option, and profit or loss treatment is the IFRS 3 approach.

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