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

Which situation is a business combination achieved without the transfer of consideration, to which Ind AS 103 applies the acquisition method?

Combining two businesses by contract alone, such as forming a dual listed corporation, with no consideration transferred, is a business combination without consideration. Ind AS 103 applies the acquisition method to it, unlike a common control merger, a single asset purchase or a bonus issue.

  1. ATwo businesses agree to combine by contract alone, such as forming a dual listed corporation, with no consideration transferredCorrect
  2. BA parent merges two wholly owned subsidiaries, where both remain under its control
  3. CAn entity buys a single machine from a competitor for cash
  4. DAn entity issues bonus shares to its existing shareholders

Explanation

Ind AS 103 states that an acquirer may obtain control without transferring consideration, for example when the acquiree repurchases its own shares, minority veto rights lapse, or businesses combine by contract alone such as a stapling arrangement or dual listed corporation. The common control merger falls under pooling, and buying a machine or issuing bonus shares is not obtaining control of a business.

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