Page 16 - 16. COMPILER QB - INDAS 103

SOLUTION

Computation of Goodwill / Capital reserve on consolidation as per Ind AS 103
Particular Rs.
Cost of investment:
Share exchange (50,000 x 25) 12,50,000
Cash consideration 50,00,000
Contingent consideration 9,80,000
Consideration transferred at date of acquisition [A] 72,30,000
Fair value of non-controlling interest at date of acquisition [B] (1,00,000 x 35% x 12) 4,20,000
Total [C]= [A] +[B] 76,50,000
Net asset acquired at date of acquisition [D] (80,00,000)
Capital Reserve [D] –[C] 3,50,000

In a business combination, acquisition-related costs (including stamp duty) are expensed in the period in

which such costs are incurred and are not included as part of the consideration transferred. Therefore,
Rs.1,50,000 incurred by Nafa Ltd. in relation to acquisition, will be ignored by Bima Ltd. & transfer to P&L.
Journal entry at the date of acquisition by Bima Limited as per Ind AS 103:
Rs. Rs.
Identifiable net assets 80,00,000
To Equity share capital (50,000x 10) 5,00,000
To Securities Premium (50,000 x 15 ) 7,50,000
To Cash 50,00,000
To Provision for contingent consideration to Nafa Ltd. 9,80,000
To Non – controlling Interest 4,20,000
To Capital Reserve 3,50,000

Q9. (May. 21)
Monsoon Limited acquired, on 30 September, 20X2, 70% of the share capital of Mark Limited, an entity

registered as a 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
was 17.5 million EURO on 30 September, 20X2.
The exchange rates as on 30 September, 20X2 was Rs. 82 per EURO and on 31st 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

Ind AS 21 requires that goodwill arising on business combination shall be expressed in the functional currency
of the foreign operation and shall be translated at the closing rate.
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
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