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acquisition date) (200+62.5) (262.5) (160+57.5) (217.5)
Capital Reserve 52.5 41.5
Total Capital Reserve (52.5 + 41.5)
94

4. Calculation of Non-Controlling Interest
Nisha Ltd. Sandhya Ltd.
At Fair Value (See Note 3) 40 64
Add: Post Acquisition Reserves (See Note 1) (5× 20%) 1 (5 × 40%) 2
Add: Post Acquisition Retained Earnings (See (7.5 × 20%) 1.5 (6.5 × 40%) 2.6
Note 1)
Less: NCI share of investment in Sandhya Ltd.* (140x20%) (28)*

14.5 68.6

Total (14.5 + 68.6) 83.1
*Note: The Non-controlling interest in Nisha Ltd. will take its proportion in Sandhya Ltd. So they have to bear
their proportion in the investment made by Nisha Ltd. (as a whole) in Sandhya Ltd.

5. Calculation of Consolidated Other Equity
Reserves Retained Earnings
Usha Ltd. 90 80
Add: Share in Nisha Ltd. (5 x 80%) 4 (7.5 × 80%) 6
Add: Share in Sandhya Ltd. (5 ×60%) 3 (6.5 ×60%) 3.9
97 89.9
Note: In the above solution, it is assumed date the sale of goods by Sandhya Ltd. is done after acquisition of
shares by Nisha Ltd. Alternatively, one may assume that the sale has either been done before acquisition of

shares by Nisha Ltd. in Sandhya Ltd. or sale has been throughout the year. Accordingly, there treatment for
unrealized gain may vary.

Q26. (Nov. 18 – 4 Marks)

Moon Ltd. acquired 75% of Star Limited on 1st April, 2017 for consideration transferred Rs60 lakh. Moon
Limited intends to recognize the Non-Controlling Interest (NCI) at proportionate share of fair value of
identifiable assets. With the assistance of a suitably qualified valuation professional, Moon Limited measures
the identifiable net assets of Star Limited at Rs. 90 lakh. Moon Limited performs a review and determines
that the business combination did not include any transactions that should be accounted for separately from
the business combination.

State whether the procedures followed by Moon Limited and the resulting measurements are appropriate or
not. Also calculate the bargain purchase gain in the process.
SOLUTION

The amount of Star Ltd.‖s identifiable net assets exceeds the fair value of the consideration transferred plus
the fair value of the NCI in Star Ltd.‖s, resulting in an initial indication of a gain on a bargain purchase.
Accordingly, Moon Ltd. reviews the procedures it used to identify and measure the identifiable net assets
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