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value of Rs. 13 Cr at that date.
– Inventory in the books of B Ltd. is shown at a cost of Rs. 2.50 Cr. The fair value of the inventory on
the acquisition date is Rs. 3 Cr.

The fair value adjustments have not been reflected in the individual financial statements of B Ltd. In the
consolidated financial statements, the fair value adjustments will be regarded as temporary differences for
the purposes of computing deferred tax. The rate of deferred tax to apply to temporary differences is 20%.
Calculate the deferred tax impact on above and calculate the goodwill arising on acquisition of B Ltd.

SOLUTION

Purchase Consideration: Rs. 25 Cr
Non-Controlling Interest [{(12 Cr x (20% / 80%)} x Rs. 2 per share] Rs. 6 Cr

Computation of Net Assets of B Ltd.

As per books Rs. 23.00 Cr
Add: Fair value differences not recognized in books of B Ltd.:
Property (18 Cr – 15 Cr) Rs. 3.00 Cr
Plant and Equipment (13 Cr – 11 Cr) Rs. 2.00 Cr

Inventory (3 Cr – 2.5 Cr) Rs. 0.50 Cr
Rs. 28.5 Cr
Less: Deferred tax liability on fair value difference @ 20%
[(3 Cr + 2 Cr + 0.50 Cr) x 20%] (Rs. 1.10 Cr)
Total Net Assets at Fair Value Rs. 27.40 Cr

Computation of Goodwill:
Purchase Consideration Rs. 25.00 Cr
Add: Non-Controlling Interest Rs. 6.00 Cr
Rs. 31.00 Cr
Less: Net Assets at Fair Value (Rs. 27.40 Cr)

Goodwill on acquisition date Rs. 3.60 Cr

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