Balance sheet as on 31.3.

2017
H Ltd.
Equity & Liabilities
Equity
Equity Share Capital 1000
Share Premium
Retained Earnings 8000
Accumulated Other Comprehensive Income
Minority Interest
9000
Non-current Liabilities
Borrowings 4000
Deferred Tax Liabilities
Current Liabilities
Trade Payables 2000
Other Liabilities 100
Total Liabilities 6100
Total Equity & Liabilities 15100
Assets
Non-current Assets
Property, Plant & Equipment 10800
Consolidation Goodwill
Investments in subsidiary
Advance Tax Net of provision 20
Current Assets
Inventories 500
Trade Receivables 1200
Cash & Cash Equivalents 2580
15100
 Equity Share Capital :
Equity share capital of H Ltd. comprises of 1000 million shares of Re. each.
Equity share capital of S Ltd. comprises of 100 million shares of Rs. 10 each.
H Ltd. acquired 60% equity shares of S Ltd. at fair value of assets and liabilities of S Ltd. as presented in the Table a
Balance Sheet. Fair value of liabilities is their respective balance sheet value. Fair value of property, plant and equip
arrrived at applying discounted operating cash flow method. Inventories are revalued at Rs. 1300 million ; and an a
230 million has been provided on doubtful debts.
Balance Sheet of S Ltd. is accordingly recast
Acquisition expenses Rs. 10 million.

Computation of Goodwill
Fair value of Assets acquired 18110
Minus Fair value of Liabilities 6389
Fair value of net assets 11721
60% of fair value of net assets 7033
Purcahse consideration:
60 million shares x Rs. 150 9000
Goodwill 1967

Mode of Payment:
Cash @ Rs. 40 per share 2400
Equity of shares of H Ltd. 4 for 1 @ Rs. 27.5 6600
9000
Rs. In Million
S Ltd. S Ltd. S Ltd. H Ltd. Consolidated
Fair value Revised Revised H Ltd. + S Ltd.

1000 1000 1240 1240

6360 6360
7000 6610 7990 7990
4111
4688
8000 11721 15590 20278

3000 3000 3000 4000 7000

1689 1689

1500 1500 1500 2000 3500

200 200 200 100 300
4700 4700 6389 6100 12489
12700 18110 21690 32767

9200 15000 15000 10800 25800

1967
9000
10 10 10 20 30

1460 1300 1300 500 1800

1830 1600 1600 1200 2800
200 200 200 170 370
12700 18110 18110 21690 32767
.
h.
ties of S Ltd. as presented in the Table above alongside the
e. Fair value of property, plant and equipment has been
re revalued at Rs. 1300 million ; and an allowance of Rs.

Value of asset increased/ decreased by

Revaluation of PPE 5800
Writing down inventories -160
Creating allowance for doubtful debts -230
Against revaluation gain of Rs. 5800 million ( OCI) , S Ltd. would cr
Deferred tax expense @ 29.12% 1688.96
Deferred Tax Expense A/c Dr
Deferred Tax Liability A/c Cr
Deferred tax expense is a deducted from OCI.
Steps of consolidation

1. Add up assets and liabilities of H Ltd. & S Ltd. - it is termed

as line by line consolidation . Do not include investment in
subsidiary (in H Ltd. Balance Sheet)
2. Incorporate a new asset - consolidation Goodwill.
3. Incorporate Minority Interest ( also termed as non-
controlling interest in Equity) - it is 40% shares of the minority
shareholders of S Ltd. in equity of the company.
1. Take the equity of H Ltd. only.
 OCI item
Charge to Retained Earnings
Charge for doubtful debts is deducted from Retained Earnings
CI) , S Ltd. would create

1689
1689
 d. - it is termed
nvestment in

dwill.
as non-
of the minority
y.