Page 2 - 16. COMPILER QB - INDAS 103
P. 2

INDAS – 103

                                   BUSINESS COMBINATION




                                          (TOTAL NO. OF QUESTIONS – 34)


                                                         Index

                                S.No.                 Particulars                Page No.
                                  1                 RTP Questions                  16.1
                                  2                 MTP Questions                 16.22

                                  3          Past Exam Paper Questions             16.56


                                                  RTPs QUESTIONS

        Q1. (May 18)
        On 1 April 20X1, Alpha Ltd. acquired 80 percent of the equity interest of Beta Pvt. Ltd. in exchange for cash

        of Rs 300. Due to legal compulsion, Beta Pvt. Ltd. had to dispose of their investments by a specified date.
        Therefore,  they  did  not  have  sufficient  time  to  market  Beta  Pvt.  Ltd.  to  multiple  potential  buyers.  The
        management of Alpha Ltd. initially measures the separately recognizable identifiable assets acquired and the
        liabilities  assumed  as  of  the  acquisition  date  in  accordance  with  the  requirement  of  Ind  AS  103.  The
        identifiable assets are measured at Rs 500 and the liabilities assumed are measured at Rs 100. Alpha Ltd.
        engaged an independent consultant, who determined that the fair value of 20 per cent non-controlling interest

        in Beta Pvt. Ltd. is Rs 84.
        Alpha Ltd. reviewed the procedures it used to identify and measure the assets acquired and liabilities assumed
        and to measure the fair value of both the non-controlling interest in Beta Pvt. Ltd. and the consideration
        transferred. After the review, it decided that the procedures and resulting measures were appropriate.

        Calculate the gain or loss on acquisition of Beta Pvt. Ltd. and also show the journal entries for accounting of
        its  acquisition.  Also  calculate  the  value  of  the  non-controlling  interest  in  Beta  Pvt.  Ltd.  on  the  basis  of
        proportionate interest method, if alternatively applied?
        SOLUTION:

        (i) Under Fair Value Method:
        Value of Net identified assets = Rs. 500 - Rs. 100 = Rs. 400
        Amount of consideration transferred = Rs. 300

        Fair Value of 20% NCI holding = Rs. 84
        Hence,  there  will  be  a  gain  on  bargain  purchase  because  the  net  identified  assets  that  the  company  will
        receive is more than the consideration paid in exchange (including the NCI value).
        Therefore, Gain on bargain purchase = 400 - 300 - 84 = Rs. 16




                                                                                                                                                                                                   16.1
   1   2   3   4   5   6   7