Page 69 - 16. COMPILER QB - INDAS 103

Working Notes:
a. Fair value adjustment- As per Ind AS 103, the acquirer is required to record the assets and liabilities
at their respective fair value. Accordingly, the PPE will be recorded at

Rs 450 lakh.
b. The value of replacement award is allocated between consideration transferred and post combination
expense. The portion attributable to purchase consideration is determined based on the fair value of
the replacement award for the service rendered till the date of the acquisition. Accordingly, Rs 3 lakh
(6 x 2/4) is considered as a part of purchase consideration and is credited to David Ltd equity as

this will be settled in its own equity. The balance of Rs 3 lakh will be recorded as employee expense
in the books of Parker Ltd over the remaining life, which is 1 year in this scenario.
c. There is a difference between contingent consideration and deferred consideration. In the given case,
Rs 30 lakh is the minimum payment to be paid after 3 years and accordingly will be considered as
deferred consideration. The other element is if company meets certain target then they will get 25%

of that or Rs 30 lakh whichever is higher. In the given case, since the criterion is the minimum what
is expected to be paid, the fair value of the contingent consideration has been considered as zero. The
impact of time value on deferred consideration has been given @ 8%.
d. The additional consideration of Rs 25 lakh to be paid to the founder shareholder is contingent to
him/her continuing in employment and hence this will be considered as employee compensation and
will be recorded as post combination expenses in the income statement of Parker Ltd.

Working Notes:
1. Computation of Purchase Consideration Rs in lakh
Particulars Amount
Share capital of Parker Ltd. 400
Number of shares 4,00,000
Shares to be issued 2:1 2,00,000
Fair value per share 50
Purchase consideration (2,00,000x70%xRs 50 per share) (A) 70.00
Deferred consideration after discounting Rs 30 lakh for 3 years @ 8% (B) 23.81

Replacement award - Market based measure of the acquiree award ie Fair
value of original award (6) x ratio of the portion of the vesting period
completed (2) / greater of the total vesting period (3) or the original vesting
period (4) of the acquiree award i.e., (6 x 2 / 4) (C) 3.00
Purchase consideration (A+B+C) 96.81

2. Allocation of Purchase consideration
Particulars Book value Fair value FV adjustment
(A) (B) (A-B)
Property, plant & equipment 600 450 (150)
Investment 200 200 -
Inventories 100 100 -
Financial assets: -
Trade receivables 200 200 -
Cash and cash equivalents 200 200 -
Others 300 300
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