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(b) Value of investment in Meru Ltd. as on 31st March, 20X2 as per equity method in the consolidated
financial statements of Sumeru Ltd.

Rs.
Cost of Investment 3,00,00,000
Add: Share in Post-Acquisition Profit (1,50,00,000 x 35%) 52,50,000

Less: Unrealised gain on inventory left unsold with Meru Ltd.
[{(50,000/3,00,000) x 1,00,000} x 35%] (5,833)
Less: Dividend (75,00,000 x 35%) (26,25,000)

Carrying value as per Equity method 3,26,19,167

Q8. (IND AS 28 & IND AS 103, MTP - OCT 2020 & EXAM MAY 19)

Deepak Ltd., an automobile group, acquired 25% of the voting ordinary shares of Shaun Ltd., another
automobile business, by paying Rs. 4,320 crore on 01.04.2019. Deepak Ltd. accounts its investment in Shaun

Ltd. using equity method as prescribed under Ind AS 28. At 31.03.20, Deepak Ltd. recognised its share of the
net asset changes of Shaun Ltd. using equity accounting as follows:

(Rs. in crore)

Share of Profit or Loss 378
Share of Exchange difference in OCI 54
Share of Revaluation Reserve of PPE in OCI 27

On 01.04.2020, Deepak Ltd. acquired the remaining 75% of Shaun Ltd. for cash Rs. 13,500 crore. Fair value of
the 25% interest already owned was Rs. 4,860 crore and fair value of Shaun Ltd.'s identifiable net assets was

Rs. 16,200 crore as on 01.04.2020.
How should such a business combination be accounted for in accordance with the applicable Ind AS?

SOLUTION:

Paragraph 42 of Ind AS 103 provides that in a business combination achieved in stages, the acquirer shall re-
measure its previously held equity interest in the acquiree at its acquisition-date fair value and recognise the

resulting gain or loss, if any, in profit or loss or other comprehensive income, as appropriate. In prior reporting

periods, the acquirer may have recognized changes in the value of its equity interest in the acquiree in other
comprehensive income. If so, the amount that was recognised in other comprehensive income shall be

recognised on the same basis as would be required if the acquirer had disposed of directly the previously held
equity interest.

Applying the above, Deepak Ltd. records the following entry in its consolidated financial statements:
(Rs. in crore)
Debit Credit

Identifiable net assets of Shaun Ltd. Dr. 16,200
Goodwill (W.N.1) Dr. 2,160

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