Page 32 - 16. COMPILER QB - INDAS 103

Q14. (October 18 – 6 marks) (INDAS 36 & INDAS 103)

Sun Ltd. is an entity with various subsidiaries. The entity closes its books of account every year ending on
31st March. On 1st July 2015 Sun ltd acquired an 80% interest in Pluto ltd. Details of the acquisition were as
follows:
⮚ Sun Ltd. acquired 800,000 shares in Pluto Ltd. by issuing two equity shares for every five acquired. The

fair value of Sun Ltd.‖s share on 1st July 2015 was Rs. 4 per share and the fair value of Pluto's share was
Rs. 1.40 per share. The cost of the issue was 5% per share.
⮚ Sun ltd incurred further legal and professional costs of Rs. 100,000 that was directly related to the
acquisition.
⮚ The fair values of the identifiable net assets of Pluto Ltd at 1st July 2015 were measured at Rs. 1.3

million. Sun Ltd. initially measured the non-controlling interest in Pluto Ltd. at fair value. They used the
market value of a Pluto Ltd. share for this purpose. No impairment of goodwill arising on the acquisition
of Pluto Ltd. was required at 31st March 2016 or 2017.

⮚ Pluto ltd comprises three cash generating units A, B and C. When Pluto Ltd. was acquired the directors of
Sun Ltd. estimated that the goodwill arising on acquisition could reasonably be allocated to units A:B:C on
a 2:2:1 basis. The carrying values of the assets in these cash generating units and their recoverable
amounts are as follows:

Unit Carrying value (before goodwill allocation) Recoverable amount
Rs. ’000 Rs. ’000
A 600 740
B 550 650
C 450 400
⮚ Compute the carrying value of the goodwill arising on acquisition of Pluto Ltd. in the consolidated Balance

Sheet of Sun Ltd. at 31st March 2018 following the impairment review.
⮚ Compute the total impairment loss arising as a result of the impairment review, identifying how much of
this loss would be allocated to the non-controlling interests in Pluto Ltd.
SOLUTION

1. Computation of goodwill on acquisition
Particular Amount (Rs. ‘000)
Cost of investment (8,00,000 x 2/5 x Rs. 4) 1,280
Fair value of non-controlling interest (2,00,000 x Rs. 1·4) 280
Fair value of identifiable net assets at date of acquisition (1,300)
So goodwill equals 260

Acquisition costs are not included as part of the fair value of the consideration given under Ind AS 103,
Business Combination.
2. Calculation of impairment loss
Unit Carrying value Recoverable Impairment
Amount Loss
Before Allocation of goodwill After Allocation
Allocation (2:2:1)
A 600 104 704 740 Nil
B 550 104 654 650 4

16. 31