Page 3 - 16. COMPILER QB - INDAS 103

Journal Entry
Rs in lakhs Rs in lakhs
Identifiable assets acquired Dr. 500
To Cash consideration 300
To Liabilities assumed 100

To OCI/Equity-Gain on the bargain purchase 16
To Equity-non controlling interest in Beta Pvt Ltd. 84

(ii) Under proportionate value method:
Value of Net identified assets = Rs. 500 - Rs. 100 = Rs. 400
Amount of consideration transferred = Rs. 300

Proportionate Value of 20% NCI holding = Rs. 20% x 400 = Rs.80
Therefore, Gain on bargain purchase = 400 - 300 - 80 = Rs. 20

Q2. (Nov. 18)
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ABC Ltd. prepares consolidated financial statements upto 31 March each year. On 1 July 2017, ABC Ltd.
acquired 75% of the equity shares of JKL Ltd. And gained control of JKL Ltd. the issued shares of JKL Ltd.
is 1,20,00,000 equity shares. Details of the purchase consideration are as follows:

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● On 1 July, 2017, ABC Ltd. issued two shares for every three shares acquired in JKL Ltd. On 1 July, 2017,
the market value of an equity share in ABC Ltd. was Rs 6.50 and the market value of an equity share in
JKL Ltd. was Rs 6.
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● On 30 June, 2018, ABC Ltd. will make a cash payment of Rs. 71,50,000 to the former shareholders of JKL
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Ltd. who sold their shares to ABC Ltd. on 1 July, 2017. On 1 July, 2017, ABC Ltd. would have to pay
interest at an annual rate of 10% on borrowings.
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● On 30 June, 2019, ABC Ltd. may make a cash payment of Rs. 3,00,00,000 to the former shareholders of
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JKL Ltd. who sold their shares to ABC Ltd. on 1 July, 2017. This payment is contingent upon the revenues
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of ABC Ltd. growing by 15% over the two-year period from 1 July, 2017 to 30 June, 2019. On 1 July, 2017,
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the fair value of this contingent consideration was Rs. 2,50,00,000. On 31 March, 2018, the fair value of
the contingent consideration was Rs 2,20,00,000.
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● On 1 July, 2017, the carrying values of the identifiable net assets of JKL Ltd. in the books of that
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company was Rs. 6,00,00,000. On 1 July, 2017, the fair value of these net assets was Rs. 7,00,00,000. The
rate of tax to apply to temporary differences is 20%.

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● During the nine months ended on 31 March, 2018, JKL Ltd. had a poorer than expected operating
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performance. Therefore, on 31 March, 2018 it was necessary for ABC Ltd. to recognise an impairment of

the goodwill arising on acquisition of JKL Ltd., amounting to 10% of its total computed value.
Compute the impairment of goodwill in the consolidated financial statements of ABC Ltd. under both the
methods permitted by Ind AS 103 for the initial computation of the non- controlling interest in JKL Ltd. at
the acquisition date.

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