Page 7 - 15. COMPILER QB - INDAS 21

Journal entry to recognize gain/loss
Bond (Rs 47,700 – Rs 40,000) Dr. 7,700

Bank (Interest received) Dr. 2,655
To Interest Income (P & L) 4,200
To Exchange gain (OCI) 5,300
To OCI (fair value gain) 855

Q7. (May 21) – Similar to Q4a

Monsoon Limited acquired, on 30 September, 20X2, 70% of the share capital of Mark Limited, an entity
registered as company in Germany. The functional currency of Monsoon Limited is Indian Rupee and its
financial year ends on 31 March, 20X3.
The fair value of the net assets of Mark Limited was 23 million EURO and the purchase consideration paid is

17.5 million EURO on 30 September, 20X2.
The exchange rates as on 30 September, 20X2 was Rs.82 per EURO and at 31 March, 20X3 was Rs.84 per
EURO.
On acquisition of Mark limited, what is the value at which the goodwill / capital reserve has to be recognized
in the financial statements of Monsoon Limited as on 31 March 20X3?.

SOLUTION
Para 47 of Ind AS 21 requires that goodwill arose on business combination shall be expressed in the functional

currency of the foreign operation and shall be translated at the closing rate in accordance with paragraphs 39
and 42.
In this case, the amount of goodwill will be as follows:
Net identifiable asset Dr. Rs. 23 million
Goodwill (bal. fig.) Dr. Rs. 1.4 million
To Bank (Purchase consideration) Rs. 17.5 million

To NCI (23 x 30%) Rs.6.9 million
Thus, goodwill on reporting date in the books of Monsoon Limited would be
= 1.4 million EURO x Rs. 84 = Rs. 117.6 million.

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