Page 28 - 16. COMPILER QB - INDAS 103

Notes to Accounts:
1. Other equity X Ltd Y Ltd

General Reserve 1,500 2,000
Profit & Loss 1,000 500
Investment Allowance Reserve 500 100
XY Ltd. issued a requisite number of shares to discharge the claims of the equity shareholders of the
transferor companies. Also the new debentures were issued in exchange of the old series of both the
companies.
Prepare a note showing purchase consideration and discharge thereof and draft the Balance Sheet of XY Ltd:
(i) Assuming that both the entities are under common control

(ii) Assuming Y Ltd is a larger entity and their management will take the control of the entity XY Ltd.
The fair value of net assets of X and Y limited are as follows:
Assets X Ltd. (‘000) Y Ltd. (‘000)
Property, Plant and Equipment 9,500 1,000
Inventories 1,300 2,900
Fair value of the business 11,000 14,000

SOLUTION
(i) (Assumption: Common control transaction)
1. Calculation of Purchase Consideration
X Ltd. Y Ltd.

Rs. ’000 Rs. ’000
Assets taken over:
Property, Plant and Equipment 85,00 75,00
Investment 10,50 5,50
Inventory 12,50 27,50
Trade receivables 18,00 40,00
Cash & Cash equivalent 4,50 4,00
Gross Assets 130,50 152,00
Less: Liabilities
12% Debentures 30,00 40,00
Trade payables 10,00 (40,00) 15,00 (55,00)
Net Assets taken over 90,50 97,00
Less: Reserves and Surplus:
General Reserve 15,00 20,00
P & L A/c 10,00 5,00
Investment Allowance Reserve 5,00 1,00

Export Profit Reserve 50 (30,50) 1,00 (27,00)
Purchase Consideration 60,00 70,00
Total Purchase Consideration = 130,00 (60,00 of X Ltd. & 70,00 of Y Ltd.)

2. Discharge of Purchase Consideration
No. of shares to be issued to X Ltd =
Net Assets taken over of X Ltd. (x) Purchase Consideration / Net Assets taken over of X Ltd. and Y Ltd.
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