Page 6 - 16. COMPILER QB - INDAS 103

Statement showing the calculation of assets/liabilities taken over and treatment of difference between
consideration and assets/liabilities taken over:

(a) Net asset taken over: (Rs in crore)
Assets taken over:
Property, Plant and Equipment 15.00
Cash and cash equivalents 10.00
Other current assets 8.00
Trade Receivables 10.00
Total – A 43.00
Less: Liabilities taken over:
Borrowings 2.80
Current Liabilities 20.00
Total – B 22.80
Net Asset taken over (A-B) 20.20

(b) Treatment of difference between consideration and assets/liabilities taken over: (Rs. in crore)
Net Asset taken over – A 20.20
Less: Purchase Consideration - B 18.00
Difference (A – B) 2.20
Since the net assets taken over are more than the value of consideration being paid, it will be a Gain on
Bargain Purchase and will be recorded as part of Other Equity.

Q4. (May 19 & Oct. 19 – 12 Marks)

How should contingent consideration payable in relation to a business combination be accounted for on initial
recognition and at the subsequent measurement as per Ind AS in the following cases:

(i) On 1 April 2016, A Ltd. acquired 100% interest in B Ltd. As per the terms of agreement the purchase
consideration is payable in the following 2 tranches:
a) an immediate issuance of 10 lakhs shares of A Ltd. having face value of INR 10 per share;
b) further issuance of 2 lakhs shares after one year if the profit before interest and tax of B Ltd. for the
first year following acquisition exceeds INR 1 crore.
i. The fair value of the shares of A Ltd. on the date of acquisition is INR 20 per share. Further, the

management has estimated that on the date of acquisition, the fair value of contingent consideration
is Rs25 lakhs.
ii. During the year ended 31 March 2017, the profit before interest and tax of B Ltd. exceeded Rs1 crore.
As on 31 March 2017, the fair value of shares of A Ltd. is Rs25 per share.
(ii) Continuing with the fact pattern in (a) above except for:

- The number of shares to be issued after one year is not fixed.
- Rather, A Ltd. agreed to issue a variable number of shares having a fair value equal to Rs. 40
lakhs after one year, if the profit before interest and tax for the first year following acquisition
exceeds Rs. 1 crore. A Ltd. issued shares with Rs. 40 lakhs after a year.

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