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though it was not recognised by Akash Ltd. in its financial statements. The patent will be amortised over
the remaining useful life of the asset i.e. 6 years. Since the company is awaiting the outcome of the
trials, the value of the patent should be valued at Rs 8 crore. It cannot be estimated at Rs 12 crore and

the extra Rs 4 crore should only be disclosed as a contingent asset and not recognised.
(ii) Patent internally developed by Akash Ltd.: Further as per para 75 of lnd AS 38 ―Intangible Assets‖,
after initial recognition, an intangible asset shall be carried at revalued amount, being its fair value at the
date of the revaluation less any subsequent accumulated amortisation and any subsequent accumulated
impairment losses. For the purpose of revaluations under this Standard, fair value shall be determined by

reference to an active market.
There is no active market for patents since the fair value is based on early assessment of its sale
success. Hence it is suggested to use the cost model and recognise the patent at the actual development
cost of Rs 13 crore.
(iii) Grant of License to Akash Ltd. by the Government: As regards to the five-year licence, para 44 of Ind

AS 38 requires to recognize grant assets at fair value by MNC Ltd. It can recognize both the asset
(license) and the grant at Rs 7 crore to be amortised over 4 remaining years of useful life i.e; Rs 1.75
crore per annum.

Hence the revised working would be as follows:
Fair value of net assets of Akash Ltd. (68-50) Rs 18 crore
Add: Patent (8 + 13) Rs 21 crore

Add: License Rs 7 crore
Less: Grant for License (Rs 7 crore)
Rs 39 crore
Purchase Consideration Rs 38 crore
Capital Reserve Rs1 crore

Q29. (Nov. 19 – 4 Marks)

Parent A holds 100% in its subsidiary B. Parent A had acquired B, 10 years back and had decided to account
for the acquisition under the purchase method using fair values of the subsidiary B in its consolidated
financial statements.
During the current year, A decides to merge B with itself.

For the purpose of this proposed merger, what values of B should be used for accounting under the Ind AS?
SOLUTION

Reference to be included to Appendix C of Ind AS 103
The acquisition of B Ltd. by A Ltd. is a business combination under common control. In such a situation, a
pooling of interest method should be applied. However, B Ltd. is 100% subsidiary of A Ltd. and A Ltd. in its
Consolidated financial statements used to give the carrying values of assets and liabilities of B Ltd. at fair
value (as per acquisition under purchase method). Hence the carrying value for the purpose of pooling of

interest method will be the values given in Consolidated financial statements and not in Separate financial
statements.
In other words, since B Ltd. is merging with A Ltd. (i.e. parent) nothing has changed and the transaction
only means that the assets, liabilities and reserves of B Ltd. which were appearing in the consolidated

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