Skip to content

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

Vindhya Ltd controls Aravali Ltd, a subsidiary excluded from the group's consolidated financial statements in accordance with Ind AS 27, and also controls Satpura Ltd. Satpura Ltd acquires the business of Aravali Ltd. How does the exclusion of Aravali Ltd from consolidation affect the classification under Appendix C of Ind AS 103?

It is still a common control business combination. The fact that a subsidiary was excluded from the group's consolidated financial statements under Ind AS 27 is not relevant to deciding common control. Both entities are controlled by Vindhya Ltd, so the pooling of interests method is used.

  1. AThe combination is a common control business combination, since the exclusion is not relevant to determining common controlCorrect
  2. BThe combination must follow the acquisition method, since Aravali Ltd is outside the group's consolidation
  3. CThe combination is exempt from Ind AS 103 altogether
  4. DThe combination is a common control combination only if the exclusion is reversed first

Explanation

Appendix C says that a subsidiary excluded from consolidated financial statements under Ind AS 27 is not relevant to determining whether the combination involves entities under common control. Both entities are under Vindhya Ltd's control, so it is common control and the pooling of interests method applies. The acquisition method option wrongly treats exclusion as decisive.

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