Skip to content

CMA Final · Corporate Financial Reporting · Business Combination under Common Control

Vindhya Ltd and Narmada Ltd are both subsidiaries of Shakti Holdings Ltd. Narmada Ltd was excluded from Shakti Holdings' consolidated financial statements as permitted under Ind AS 27. Vindhya Ltd acquires the business of Narmada Ltd. How does the exclusion affect the classification and accounting under Ind AS 103 Appendix C?

The combination is under common control and uses the pooling of interests method. Ind AS 103 Appendix C says exclusion of a subsidiary from group consolidated financial statements under Ind AS 27 is not relevant to deciding whether entities are under common control.

  1. AThe combination is under common control and is accounted for using the pooling of interests method; the exclusion is not relevantCorrect
  2. BThe combination is not under common control, so the acquisition method applies
  3. CThe combination is under common control but the acquisition method must be used for the excluded entity
  4. DThe combination is outside Ind AS 103 until Narmada is consolidated

Explanation

Appendix C states that a subsidiary excluded from group consolidated financial statements under Ind AS 27 is not relevant to determining whether entities are under common control. Business combinations involving entities under common control are accounted for using the pooling of interests method.

Did you get it right without looking?

One question tells you little. A timed set on Business Combination under Common Control shows your real accuracy, how long you take and where you lose marks.

Practise Business Combination under Common ControlFree diagnostic mock

More Business Combination under Common Control questions