SARANSH Indian Accounting Standards

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Overview of Ind AS 103: Business Combinations

Definition and Acquisition Subsequent Measurement Common Control

Disclosures
Elements Method and Accounting Transactions

Identifying Reacquired rights

Of Business the acquirer
Combination
Contingent liabilities
Determining the
acquisition date
Indemnification of assets
Of Business Purchase
Consideration Contingent consideration

Determination of Purchase consideration Allocation of Purchase Consideration Recognition and Measurement of

Identifiable assets acquired and Goodwill or gain from a /PODPOUSPMMJOH JOUFSFTU

the liabilities assumed bargain purchase in the acquiree

Objective

To improve the relevance, reliability and comparability of the information provided in the
financial statements about a business combination and its effects

To accomplish that, this Ind AS establishes principles and requirements for how the acquirer, in its financial statements

Recognises and measures Determines what information to disclose to enable users

Identifiable Liabilities "OZ OPODPOUSPMMJOH Goodwill acquired in the business To evaluate the nature and
assets acquired assumed interest in the combination or a gain from a financial effects of the
acquiree bargain purchase business combination

Scope

This Ind AS applies to a transaction or other event that meets the definition of a business combination

This Ind AS does not apply to:

Accounting for Acquisition of an asset Acquisition by an investment Combination of entities

formation of a joint or group of assets that entity in subsidiary which is or businesses under
arrangements is not a business measured at FVTPL common control

t
*O TVDI DBTFT UIF BDRVJSFS TIBMM JEFOUJGZ BOE SFDPHOJTF UIF JOEJWJEVBM JEFOUJmBCMF BTTFUT BDRVJSFE BOE
liabilities assumed
t
ͳF DPTU PG UIF HSPVQ TIBMM CF BMMPDBUFE UP UIF JOEJWJEVBM JEFOUJmBCMF BTTFUT BOE MJBCJMJUJFT PO UIF CBTJT PG UIFJS
relative fair values at the date of purchase
t
/P HPPEXJMM BSJTFT JO BTTFU BDRVJTJUJPO

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SARANSH Indian Accounting Standards

An entity shall account for each business combination by applying the ACQUISITION METHOD

STEPS FOR ACCOUNTING OF BUSINESS COMBINATION (ACQUISITION METHOD)

identify a business combination

1
identify the acquirer
2

determine acquisition date

3

recognise/measure identifiable assets acquired/liabilities assumed

4

SFDPHOJTFNFBTVSF BOZ OPODPOUSPMMJOH JOUFSFTU

5

identify and measure consideration transferred

6
determine goodwill or gain on a bargain purchase
7

Identifying a Business Combination

Is there a transaction or event in which acquirer obtains control* over a business**?

Yes /P

It is a Business Combination It is an Asset Acquisition

t
1PXFS PWFS UIF JOWFTUFF

Control* t
&YQPTVSF PS SJHIUT UP WBSJBCMF SFUVSOT
t
"CJMJUZ UP VTF JUT QPXFS PWFS UIF JOWFTUFF UP BĉFDU UIF BNPVOU PG JOWFTUPS SFUVSOT

t
*OUFHSBUFE TFU PG BDUJWJUJFT BOE BTTFUT

Business** t
$BQBCMF PG CFJOH DPOEVDUFE BOE NBOBHFE GPS UIF QVSQPTF PG QSPWJEJOH goods
or services to customers, generating investment income (such as dividends or
interest) or generating other income from ordinary activities

A business combination may be structured in a variety of ways for legal, taxation or other reasons, which include but are not
limited to:
(a) one or more businesses become subsidiaries of an acquirer or the net assets of one or more businesses are legally merged
into the acquirer
(b) one combining entity transfers its net assets, or its owners transfer their equity interests, to another combining entity or its
owners
(c) all of the combining entities or its owners transfer their net assets or equity interest, to a newly formed entity
(d) a group of former owners of one of the combining entities obtains control of the combined entity.

An acquirer might obtain control of an acquiree in a variety of ways, for example:

(a) by transferring cash, cash equivalents or other assets (including net assets that constitute a business)
(b) by incurring liabilities
(c) by issuing equity interests
(d) by providing more than one type of consideration
(e) without transferring consideration, including by contract alone

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SARANSH Indian Accounting Standards

Business Elements
(It generally consists of:)

Inputs Inputs and processes are

(economic resource that creates, or has the ability to create, outputs) mandatorily required:
t
*OQVUT FH FNQMPZFFT OPO
current assets)
Process t
1SPDFTTFT FH TUSBUFHJD
(Any system, standard, protocol, convention or rule that when applied to an input or operation management)
inputs, creates or has the ability to create outputs.)
Outputs are not mandatorily
required for a set of activities
and assets to qualify as a
Output
business.
(The result of inputs and processes applied to those inputs that provide or have the
ability to provide a return in the form of dividends, lower costs or other economic t
Development stage activities
benefits directly to investors or other owners) without outputs may still be
businesses

Goodwill :
ͳFSF JT B QSFTVNQUJPO UIBU JG HPPEXJMM FYJTUT UIF BDRVJTJUJPO JT B CVTJOFTT
But
A business need not necessarily have goodwill

Meaning of a Business

A business need not include all the inputs or processes that the seller used in operating that business

If a market participant is capable of utilising the acquired set of activities and assets to produce outputs by
integrating the acquired set with its own inputs and processes, the acquired set might constitute a business

If the elements that are missing from an acquired set are not present with a market participant but easily
replaced/replicated, the acquired set might still be a business

The acquired set of activities and assets must have at least some inputs and processes in order to be
considered a business

Definition of a Business: Development Stageof a set of Activities and Assets

Is the transferred set of activities and assets a business?

Factors include but are not limited to whether the set:

t
)BT CFHVO JUT QMBOOFE QSJODJQBM BDUJWJUJFT
t
)BT FNQMPZFFT JOUFMMFDUVBM QSPQFSUZ BOE PUIFS JOQVUT BOE QSPDFTTFT UIBU DPVME CF BQQMJFE UP UIPTF
inputs
t
*T QVSTVJOH B QMBO UP QSPEVDF PVUQVUT
t
8JMM CF BCMF UP PCUBJO BDDFTT UP DVTUPNFST UIBU XJMM QVSDIBTF UIF PVUQVUT

Determination should be based on whether the integrated set is capable of being conducted and managed as
a business by a market participant (rather than the specific acquirer)

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SARANSH Indian Accounting Standards

Further Assessment to Determine Whether Transaction is Business or not:

/P
Acquired
Inputs GO T O A
and
Processes GO TO B

Yes
Yes Yes

8IFUIFS JU JT DSJUJDBM UP UIF 8IFUIFS BDRVJSFE QSPDFTT JT

ability to continue producing unique/scarce or cannot be
GO TO A
outputs and the inputs replaced without significant
acquired include an organized /P cost, effort, or delay? /P
8IFUIFS FYQFSJFODFE XPSLGPSDF UP
Outputs Yes
perform that process
FYJTU BU
acquisition 8IFUIFS UIF JOQVUT BDRVJSFE
date? include both an organized
8IFUIFS JU JT DSJUJDBM UP UIF workforce to perform that
ability to develop/convert process AND include other GO TO B
acquired input or inputs into inputs the workforce could
outputs? Yes develop/convert into outputs? Yes
/P

/P /P

/P TVCTUBOUJWF It is an asset GO TO A
A process acquired acquisition

Substantive It is a business
B process acquired combination

Concentration Test
An optional test (the concentration test) has been introduced in Ind AS 103 to permit a simplified assessment of whether an acquired set
of activities and assets is not a business.
On the basis of the above test, following will be the consequences:

Test is met Test is not met

/PU B CVTJOFTT Further

assessment
to be made

/P GVSUIFS
assessment is
needed

t
0QUJPOBM UFTU JT UP JEFOUJGZ DPODFOUSBUJPO PG GBJS WBMVF

t
"O FOUJUZ NBZ NBLF TVDI BO election separately for each transaction or other event
t
ͳF DPODFOUSBUJPO UFTU JT NFU JG TVCTUBOUJBMMZ all of the fair value of the gross assets acquired is concentrated in a single identifiable
asset or group of similar identifiable assets

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SARANSH Indian Accounting Standards

Differences in Accounting for Business Combination Vs. Asset Acquisition

Impact on Business combination
Intangible assets Intangible assets are recognised at fair
value, if they are separately identifiable
Goodwill Goodwill (or gain on bargain purchase)
may arise
Initial measurement of assets acquired and Fair value
liabilities assumed
Directly attributable transaction costs &YQFOTFE
%FGFSSFE UBY PO JOJUJBM SFDPHOJUJPO Recognised
Contingent liabilities assumed To be recognised if represents present
obligation that arises from past events and
its fair value can be measured reliably with
subsequent changes to profit or loss
Disclosures More FYUFOTJWF
Asset acquisition
Intangible assets acquired as part of a
group of assets would be recognised
and measured based on an allocation of
the overall cost of the transaction with
reference to their relative fair values
/P goodwill is recognized
Allocated cost (on a relative fair value
basis)
Capitalised
/PU recognized
/PU recognised, subject to Ind AS 37
Less disclosures required

All business combination within the scope of Ind AS 103 are accounted under the
acquisition method (also known as purchase method)
Identifying the Acquirer
For each business combination and in order to apply the purchase method, one of the
combining entities shall be identified as the acquirer

The guidance in Ind AS 110 shall be used to identify the acquirer

As per Ind AS 110, an investor controls an investee if and only if the investor has all the following:

Power over the &YQPTVSF PS The ability to use Control over the
investee rights, to variable its power over the Investee
returns from its investee to affect
involvement with the amount of the
the investee investor’s returns

Note: The above definition is very wide and control assessment does not depend only on voting rights instead it
depends on other factors as well, which are discussed in detail in Ind AS 110

*G BQQMZJOH UIF HVJEBODF JO *OE"4  EPFT OPU DMFBSMZ JOEJDBUF UIF BDRVJSFS UIF GPMMPXJOH GBDUPST BSF DPOTJEFSFE JO
making the determination :

Acquirer is usually the Acquirer is usually the entity that issues its The entity whose size is
entity that transfers the equity interests significantly greater than
cash or other assets or [Note: )PXFWFS JO TPNF CVTJOFTT that of the other combining
incurs the liabilities combinations, commonly called ‘reverse entity or entities
acquisitions’, the issuing entity is the acquiree]

Acquirer normally has the largest portion of the voting rights in the combined entity
DPOTJEFS UIF FYJTUFODF PG BOZ VOVTFE PS TQFDJBM WPUJOH BSSBOHFNFOUT BOE PQUJPOT
warrants or convertible securities)

&YJTUFODF PG B MBSHF NJOPSJUZ WPUJOH JOUFSFTU JO UIF DPNCJOFE FOUJUZ JG OP PUIFS PXOFS
or organised group of owners has a significant voting interest

Acquirer will have ability to elect or appoint or to remove a majority of the members
of the governing body of the combined entity

The acquirer is usually the combining entity whose (former) management dominates
the management of the combined entity

ͳF BDRVJSFS JT VTVBMMZ UIF DPNCJOJOH FOUJUZ UIBU QBZT B QSFNJVN PWFS UIF QSF
combination fair value of the equity interests of the other combining entity or entities

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SARANSH Indian Accounting Standards

Date of Acquisition

The date on which the acquirer obtains control of the acquiree (as identified by the acquirer)

In general, the date of obtaining the control is

the date on which the acquirer legally transfers the
consideration, acquires the assets and assumes the
liabilities of the acquiree

)PXFWFS UIF BDRVJSFS NJHIU PCUBJO DPOUSPM PO B EBUF UIBU JT FJUIFS FBSMJFS PS MBUFS UIBO UIF DMPTJOH EBUF

Classification

The acquirer classifies and designates assets and liabilities at acquisition date based on:
– acquirer's economic conditions
– contractual terms of the assets/liabilities
– acquirer's operating or accounting policies
o
PUIFS QFSUJOFOU DPOEJUJPOT FYJTUJOH BU UIF BDRVJTJUJPO EBUF

&YDFQUJPO UP UIF DMBTTJmDBUJPO

t
DMBTTJmDBUJPO PG B MFBTF DPOUSBDU JO XIJDI BDRVJSFF JT UIF MFTTPS BT FJUIFS BO PQFSBUJOH MFBTF PS B mOBODF MFBTF JO BDDPSEBODF
with Ind AS 116, Leases
t
$MBTTJmDBUJPO PG B DPOUSBDU BT BO JOTVSBODF DPOUSBDU JO BDDPSEBODF XJUI *OE "4  *OTVSBODF $POUSBDUT

The acquirer shall classify those contracts on the basis of the contractual terms and other factors at the inception of the contract
(and not on the acquisition date)

Recognition and Measurement Principle

At the acquisition date, the acquirer shall recognise, separately from goodwill:
 UIF JEFOUJmBCMF BTTFUT BDRVJSFE
 UIF MJBCJMJUJFT BTTVNFE BOE
 BOZ OPODPOUSPMMJOH JOUFSFTU JO UIF BDRVJSFF

Exceptions to recognition principle: DPOUJOHFOU MJBCJMJUJFT EFGFSSFE UBYFT FNQMPZFF CFOFmUT BTTFUT JOEFNOJmDBUJPOT MFBTFT JO
which acquiree is the lessee

The acquirer shall measure the identifiable assets acquired and the liabilities assumed at their acquisition-date fair values

Exceptions to measurement principle: EFGFSSFE UBYFT FNQMPZFF CFOFmUT BTTFUT JOEFNOJmDBUJPOT MFBTFT JO XIJDI BDRVJSFF JT
UIF MFTTFF SFBDRVJSFE SJHIUT TIBSFCBTFE QBZNFOUT BTTFUT IFME GPS TBMF

For recognition of identifiable assets acquired/ liabilities assumed as part of the acquisition method, these assets/ liabilities
t
NVTU NFFU UIF EFmOJUJPOT PG BTTFUT BOE MJBCJMJUJFT JO UIF 'SBNFXPSL

JTTVFE CZ *$"* BU UIF BDRVJTJUJPO EBUF
t
NVTU CF QBSU PG XIBU UIF BDRVJSFS BOE UIF BDRVJSFF PS JUT GPSNFS PXOFST FYDIBOHFE JO UIF CVTJOFTT DPNCJOBUJPO USBOTBDUJPO

The acquirer shall determine which assets acquired or liabilities assumed, if any, are the result of separate transactions, they are
to be accounted for in accordance with their nature and the applicable Ind AS

The acquirer’s application of the recognition principle and conditions may result in recognising some assets and liabilities that the
acquiree had not previously recognised as assets and liabilities in its financial statements

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SARANSH Indian Accounting Standards

Exceptions to Recognition
& Measurement Principles

Limited to acquisition date accounting

An asset or liability which otherwise would The assets and liabilities are measured at a value
not have been recorded gets recorded other than the acquisition date fair values

Both Recognition and Measurement

3FDPHOJUJPO &YDFQUJPOT
.FBTVSFNFOU FYDFQUJPOT FYDFQUJPOT

Contingent Income Employee Indemnification Lessees in which the

liabilities 5BYFT benefits assets acquiree is the lessee

Recognise if its Recognise and Recognise and Recognise and measure

fair value can be measure as per measure as per at the acquisition date
measured reliably Ind AS 12 Ind AS 19 at its fair value

t
3FDPHOJTF 306 BTTFUT BOE MFBTF MJBCJMJUJFT BT QFS *OE "4  FYDFQU TIPSU UFSN MFBTF PS MPX WBMVF
lease
t
.FBTVSF UIF MFBTF MJBCJMJUZ at present value of remaining lease payments as a new lease at the
acquisition date
t
.FBTVSF 306 BTTFUT BU TBNF BNPVOU BT MFBTF MJBCJMJUZ

Share based payment awards Assets held for sale Reacquired rights

Measured as per Measured as per Ind AS Measured on the basis

Ind AS 102 at the 105 at the acquisition date of remaining contractual
acquisition date at fair value less cost to sell term of related contract

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SARANSH Indian Accounting Standards

Recognising Particular Assets Acquired and Liabilities Assumed

For recognition Intangible The acquirer shall recognise, separately from goodwill, the identifiable intangible
purposes assets assets acquired in a business combination

An intangible asset is identifiable if it meets either the separability criterion or the

DPOUSBDUVBMMFHBM DSJUFSJPO

An acquirer may reacquire a right that it had previously granted to the acquiree to use one or
Reacquired rights
more of the acquirer’s recognised or unrecognised assets

A reacquired right is an identifiable intangible asset that the acquirer recognises separately from
goodwill

Assembled workforce
and other items that The acquirer subsumes into goodwill the value of an acquired intangible asset that is not
are not identifiable identifiable or not qualifies as assets as of the acquisition date

Operating The acquirer shall recognise assets or liabilities related to an operating lease in
For measurement leases in which the acquiree is the lessor
purposes which the
acquiree is
the lessee The acquirer does not recognise a separate asset or liability if the terms of an
operating lease are either favourable or unfavourable when compared with the
market terms

Recognising and Measuring Goodwill or Gain from Bargain Purchase

Consideration /PO Acquisition date fair Fair value of net

Goodwill transferred Controlling value of acquirer’s identifiable assets
*OUFSFTUT /$* previously held at the acquisition
equity interest date

At Fair value At Proportionate share in

OR the recognized amounts of
acquiree’s identifiable net assets

t
/$* JT FRVJUZ in a subsidiary not attributable, directly or indirectly

to a parent
t
.FBTVSFNFOU PQUJPO GPS /$* JT EPOF BU BDRVJTJUJPO EBUF
t
Choice is made for each business combination (not a policy choice)

Note:
“Bargain Purchase” is accounted when sum total of fair value of net assets and /$* FYDFFET DPOTJEFSBUJPO transferred

In case of bargain purchase, the acquirer should reassess whether it has correctly identified all of the assets acquired and all of the
liabilities assumed

t
*G SFBTTFTTNFOU DPOmSNT CBSHBJO QVSDIBTF any gain is recognized in equity as capital reserve (routed through OCI) on the
acquisition date.
t
)PXFWFS JG UIFSF EPFT OPU FYJTU DMFBS FWJEFODF PG UIF VOEFSMZJOH SFBTPOT GPS DMBTTJGZJOH UIF CVTJOFTT DPNCJOBUJPO BT B CBSHBJO
purchase, the gain (bargain purchase) should be recognised directly in equity as capital reserve.

To determine the amount of goodwill in a business combination in which no consideration is transferred, the acquirer shall use the
BDRVJTJUJPOEBUF GBJS WBMVF PG UIF BDRVJSFST JOUFSFTU JO UIF BDRVJSFF JO QMBDF PG UIF BDRVJTJUJPOEBUF GBJS WBMVF PG UIF DPOTJEFSBUJPO USBOTGFSSFE

Note:
Acquisition related costs charged to P&L FYDFQU EFCU TFDVSJUJFT JTTVF DPTUoJODPSQPSBUFE JO FĉFDUJWF JOUFSFTU SBUF *OE "4  BOE
Equity issue cost recognized in equity (Ind AS 32).

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SARANSH Indian Accounting Standards

Consideration Transferred

Consideration transferred is the TVN PG UIF BDRVJTJUJPOEBUF GBJS WBMVFT of:

Assets transferred Liabilities incurred by Equity interests

by the acquirer the acquirer to former issued by the
owners of the acquiree acquirer

Note: "OZ QPSUJPO PG UIF BDRVJSFST TIBSFCBTFE QBZNFOU BXBSET FYDIBOHFE GPS BXBSET IFME CZ UIF BDRVJSFFT FNQMPZFFT UIBU
is included in consideration transferred in the business combination shall be measured in accordance with Ind AS 102 rather
than at fair value.

It also includes acquisition date fair value of contingent consideration

Examples of potential forms of consideration include cash, other assets, a business or a subsidiary of the acquirer, contingent
consideration, ordinary or preference equity instruments, options, warrants and member interests of mutual entities.

*G UIF DBSSZJOH BNPVOU PG USBOTGFSSFE BTTFUT  MJBCJMJUJFT EJĉFS GSPN GBJS WBMVF "/%

8IFUIFS UIFZ SFNBJO XJUIJO UIF DPNCJOFE FOUJUZ BGUFS CVTJOFTT DPNCJOBUJPO GPS FYBNQMF UIF BTTFUT PS MJBCJMJUJFT XFSF
transferred to the acquiree rather than to its former owners)

Yes /P

t
Measure those assets and liabilities at t
Remeasure the transferred

their carrying amounts immediately
before the acquisition date
t
(BJO PS -PTT JT not recognized in Profit
or Loss (when acquirer controls the
assets or liabilities both before and after
the combination)
assets or liabilities to their fair
values as of the acquisition date
t
(BJO PS -PTT JT SFDPHOJ[FE JO
Profit or Loss

Acquisition-Related Costs

Definition "DRVJTJUJPOSFMBUFE DPTUT BSF DPTUT UIBU UIF BDRVJSFS JODVST UP FĉFDU B CVTJOFTT DPNCJOBUJPO

Those costs include finder’s fees; advisory, legal, accounting, valuation and other professional or consulting
&YBNQMFT fees; general administrative costs, including the costs of maintaining an internal acquisitions department;
and costs of registering and issuing debt and equity securities

Accounting ͳF BDRVJSFS TIBMM BDDPVOU GPS BDRVJTJUJPOSFMBUFE DPTUT BT FYQFOTFT in the periods in which the costs are
treatment incurred and the services are received

&YDFQUJPO The costs to issue debt or equity securities shall be recognised in accordance with Ind AS 32 and Ind AS 109

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SARANSH Indian Accounting Standards

It is the obligation by the acquirer to transfer

Contingent Consideration additional assets or equity interest, if specified
future events occur or conditions are met

For changes occurred during the measurement period,

Initial recognition at fair value the acquirer shall retrospectively adjust the provisional
amounts recognised at the acquisition date

Equity Other contingent consideration

/PU SFNFBTVSFE

8JUIJO UIF TDPQF /PU XJUIJO UIF TDPQF PG

Subsequent settlement is of Ind AS 109 Ind AS 109
accounted for within equity

Measured at fair Changes in fair value Measured at fair Changes in fair value
value at is recognised in value at each is recognised in
each reporting date profit or loss reporting date profit or loss

A Business Combination Achieved in Stages

An acquirer may obtain the control of an acquiree in stages, by successive purchases of shares (commonly referred to as a ‘step
acquisition’)

8IFO B QBSUZ UP B KPJOU BSSBOHFNFOU PCUBJOT DPOUSPM PG B CVTJOFTT UIBU JT B KPJOU PQFSBUJPO BOE IBE SJHIUT UP UIF BTTFUT BOE
obligations for the liabilities relating to that joint operation immediately before the acquisition date, the transaction is a
business combination achieved in stages

The acquirer shall remeasure its entire previously held interest in the joint operation as follows:

*G UIF BDRVJSFS IPMET B OPODPOUSPMMJOH FRVJUZ JOWFTUNFOU JO UIF BDRVJSFF JNNFEJBUFMZ CFGPSF PCUBJOJOH DPOUSPM

Remeasure investment to fair value as at the date of gaining control

Recognise any gain or loss on remeasurement in profit or loss or OCI, as appropriate

In prior periods, whether the acquirer had recognised changes in the value of the equity interest in OCI?

Yes /P

Amount that was recognised in OCI should Any resulting gain or loss is
be recognised on the same basis as would recognised in profit or loss
be required if the acquirer had disposed
directly of the previously held equity interest

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SARANSH Indian Accounting Standards

A Business Combination Achieved Without the Transfer of Consideration

The acquisition method of accounting applies to such business combinations

It includes following circumstances:

ͳF BDRVJSFF SFQVSDIBTFT B TVĊDJFOU OVNCFS PG JUT PXO TIBSFT GPS BO FYJTUJOH JOWFTUPS UIF BDRVJSFS UP PCUBJO
control

Minority veto rights lapse that previously kept the acquirer from controlling an acquiree in which the acquirer held
the majority voting rights

The acquirer and acquiree agree to combine their businesses by contract alone

Example: Bringing two businesses together in a stapling arrangement or forming a dual listed
corporation

The equity interests in the acquiree held by parties other than the acquirer BSF B OPODPOUSPMMJOH JOUFSFTU JO UIF BDRVJSFST
QPTUDPNCJOBUJPO mOBODJBM TUBUFNFOUT even if the result is that all of the equity interests in the acquiree are attributed to the
OPODPOUSPMMJOH JOUFSFTU

Measurement Period

It is the period after the acquisition date during which the acquirer may adjust the provisional amounts
Definition
recognized for a business combination

It ends as soon as the acquirer receives the information it was seeking about facts and circumstances that
Duration
FYJTUFE BT PG UIF BDRVJTJUJPO EBUF PS MFBSOT UIBU NPSF JOGPSNBUJPO JT OPU PCUBJOBCMF

Note: ͳF NFBTVSFNFOU QFSJPE TIBMM OPU FYDFFE POF ZFBS GSPN UIF BDRVJTJUJPO EBUF

Accounting / Adjustment:
Information that
t
3FUSPTQFDUJWFMZ BEKVTU UIF QSPWJTJPOBM BNPVOUT
FYJTUFE BU UIF
t
3FDPHOJTF OFX BTTFUTMJBCJMJUJFT UP SFnFDU UIF OFX JOGPSNBUJPO
acquisition date
t
"EKVTU UIF HPPEXJMM BDDPSEJOHMZ

Information Accounting / Adjustment:

Time of occurred during t
*ODMVEF BEKVTUNFOUT GPS TVDI EFWFMPQNFOUT BGUFS UIF BDRVJTJUJPO EBUF CVU EVSJOH
occurrence of the measurement the measurement period only (like changes in estimates)
information and period t
Prospectively adjust the provisional amounts UP SFnFDU OFX JOGPSNBUJPO BSJTJOH
its accounting/ after the acquisition date
adjustment t
/P adjustment to goodwill
t
Correct the errors retrospectively in accordance with Ind AS 8

1PTU Accounting / Adjustment:

measurement t
/P BEKVTUNFOU to the accounting for the business combination
period t
"DDPVOUJOH GPS B CVTJOFTT DPNCJOBUJPO JT amended only to correct an error as
information per Ind AS 8

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SARANSH Indian Accounting Standards

Measurement Period Review

8IFUIFS DPOEJUJPOT FYJTUFE PO

acquisition date?

Yes /P

8IFUIFS JOGPSNBUJPO QFSUBJOJOH UP /P

business acquisition obtained within Recognise increase/decrease in
1 year of acquisition date? asset or liability as error as per
applicable Ind AS.
Yes

Then recognise increase/decrease in

identifiable asset or liability by giving
corresponding effect in Goodwill.

Determining what is Part of the Business Combination Transaction

ͳF BDRVJSFS BOE UIF BDRVJSFF NBZ IBWF B QSFFYJTUJOH The acquirer and the acquiree may enter into an
relationship or other arrangement before negotiations OR arrangement during the negotiations that is separate
for the business combination began from the business combination

In either situation, the acquirer shall identify any amounts that are not part of what the acquirer and the acquiree (or its former
PXOFST FYDIBOHFE JO UIF CVTJOFTT DPNCJOBUJPO JF BNPVOUT UIBU BSF OPU QBSU PG UIF FYDIBOHF GPS UIF BDRVJSFF

The acquirer shall recognise as part of applying the acquisition method only the consideration transferred for the acquiree and
UIF BTTFUT BDRVJSFE BOE MJBCJMJUJFT BTTVNFE JO UIF FYDIBOHF GPS UIF BDRVJSFF

Separate transactions shall be accounted for in accordance with the relevant Ind AS

A transaction entered into by or on behalf of the acquirer or primarily for the benefit of the acquirer or the combined entity,
rather than primarily for the benefit of the acquiree (or its former owners) before the combination, is likely to be a separate
transaction

ͳF GPMMPXJOH BSF FYBNQMFT PG TFQBSBUF USBOTBDUJPOT UIBU BSF not to be included in applying the acquisition method:

a transaction that a transaction that a transaction that reimburses

JO FĉFDU TFUUMFT QSF remunerates employees the acquiree or its former
FYJTUJOH SFMBUJPOTIJQT or former owners of owners for paying the
between the acquirer the acquiree for future BDRVJSFST BDRVJTJUJPO
and acquiree services related costs

ͳF BDRVJSFS TIPVME DPOTJEFS UIF GPMMPXJOH GBDUPST XIJDI BSF OFJUIFS NVUVBMMZ FYDMVTJWF OPS JOEJWJEVBMMZ DPODMVTJWF JO
determining whether the transaction is separate from business combination:

Reasons for the transaction 8IP JOJUJBUFE UIF USBOTBDUJPO Timing of the transaction

© ICAI BOS(A) 168

SARANSH Indian Accounting Standards

Accounting for a Pre-existing Relationship

5ZQFT PG 1SFFYJTUJOH 3FMBUJPOTIJQT

/PODPOUSBDUVBM FH -FHBM 4VJU Contractual (e.g. Supply Agreement) Reacquired right (e.g. Franchise Agreement)

Lesser
of

Fair Value

Fair Value based

Favourable/ on remaining
Measurement Stated Settlement
6OGBWPVSBCMF contractual term
Provisions
contract position (without renewals)

Profit & Loss, not goodwill Capitalised and amortised

Contingent Payments to Employees or Selling Shareholders

5P JEFOUJGZ BO BSSBOHFNFOU GPS QBZNFOUT UP FNQMPZFFT PS TFMMJOH TIBSFIPMEFST JT QBSU PG UIF FYDIBOHF GPS UIF BDRVJSFF PS JT B
transaction separate from the business combination, the acquirer should consider the following indicators:

Duration of continuing
Continuing employment Level of remuneration
employment

Incremental payments
/VNCFS PG TIBSFT PXOFE Linkage to the valuation
to employees

Formula for determining Other agreements and

consideration issues

© ICAI BOS(A) 169

SARANSH Indian Accounting Standards

Acquirer Share Based Payment Awards Exchanged for Awards Held by the Acquiree’s Employees

Business combination "O BDRVJSFS NBZ FYDIBOHF JUT TIBSFCBTFE QBZNFOU BXBSET SFQMBDFNFOU BXBSET GPS BXBSET IFME CZ
transaction employees of the acquiree

/BUVSF PG BXBSET The above share based payment awards will include vested and unvested shares

&YDIBOHFT PG TIBSF PQUJPOT PS PUIFS TIBSFCBTFE QBZNFOU BXBSET JO DPOKVODUJPO XJUI B CVTJOFTT
Type of Accounting
combination are BDDPVOUFE GPS BT NPEJmDBUJPOT PG TIBSFCBTFE QBZNFOU BXBSET as per Ind AS 102

To allocate the replacement award's value between the amounts attributable to:
Objective of t
QSFDPNCJOBUJPO TFSWJDF USFBUFE BT QBSU PG consideration transferred)
Accounting t
QPTUDPNCJOBUJPO TFSWJDF BDDPVOUFE GPS BT DPNQFOTBUJPO FYQFOTF in the post combination financial
statements)

1SF .BSLFUCBTFE Completed Greater of total

combination measure of vesting period original vesting
period the acquiree as on the period or total revised
service cost award acquisition date vesting period

Accounting

1PTU
combination Market based Amount attributed
period measure of the to pre combination
service cost replacement award service

Market based measure means that awards will be

re-measured on the acquisition date as per the
requirements of Ind AS 102

t
ͳF BDRVJSFS TIBMM BUUSJCVUF B QPSUJPO PG B SFQMBDFNFOU BXBSE UP QPTU

combination service if it requires post combination service, regardless of
whether employees had rendered all of the service required for their acquiree
awards to vest before the acquistion date

t
$IBOHFT JO UIF FTUJNBUFE OVNCFS PG SFQMBDFNFOU BXBSET FYQFDUFE UP WFTU

*NQPSUBOU /PUFT are SFnFDUFE JO SFNVOFSBUJPO DPTU GPS UIF QFSJPET JO XIJDI UIF DIBOHFT PS
forfeitures occur not as adjustments to the consideration transferred in the
business combination.

t
ͳF FĉFDUT PG PUIFS FWFOUT TVDI BT NPEJmDBUJPOT PS UIF VMUJNBUF PVUDPNF

of awards with performance conditions, that occur after the acquisition date
are accounted for as per Ind AS 102 in determining remuneration cost for the
period in which an event occurs

t
3FRVJSFNFOUT GPS EFUFSNJOJOH UIF QPSUJPOT PG B SFQMBDFNFOU BXBSE BUUSJCVUBCMF

UP QSFDPNCJOBUJPO BOE QPTUDPNCJOBUJPO TFSWJDF apply regardless of whether
a replacement award is classified as a liability or as an equity instrument as per
Ind AS 102

t
ͳF JODPNF UBY FĉFDUT PG SFQMBDFNFOU BXBSET PG TIBSFCBTFE QBZNFOUT TIBMM CF

recognised as per Ind AS 12

© ICAI BOS(A) 170

SARANSH Indian Accounting Standards

Equity-Settled Share-Based Payment Transactions of the Acquiree

"DRVJSFF NBZ IBWF PVUTUBOEJOH TIBSFCBTFE QBZNFOU USBOTBDUJPOT UIBU UIF BDRVJSFS EPFT OPU FYDIBOHF GPS JUT TIBSFCBTFE
payment transactions

"DRVJSFFT FYJTUJOH BXBSE XJMM CF TFUUMFE JO JUT PXO TIBSFT BOE UIF DPOTFRVFOUJBM TIBSFIPMEFST XJMM CFDPNF UIF /PODPOUSPMMJOH
shareholders

Accounting

Vested shares 6OWFTUFE TIBSFT

Measured at their Such acquiree 1SFDPNCJOBUJPO 1PTUDPNCJOBUJPO

NBSLFUCBTFE TIBSFCBTFE period period
measure and the payment
value credited to transactions
Share based payment are part of Considered as a Debited as employee cost
reserve /$* QBSU PG /$* BOE DSFEJUFE UP /$* in the
balance sheet

.BSLFU Completed Greater of total

b a s e d vesting period original vesting Market based A m o u n t
measure of as on the period or total measure of the attributed to pre
the acquiree acquisition revised vesting replacement combination
award date period award service

Subsequent Measurement and Accounting

An acquirer shall subsequently measure and account for assets acquired, liabilities assumed or incurred and equity instruments
issued in a business combination in accordance with other applicable Ind AS

Exception: Ind AS 103 provides guidance on subsequently measuring and accounting for the following assets acquired, liabilities
assumed or incurred and equity instruments issued in a business combination

Reacquired Contingent liabilities Indemnification Contingent

rights recognised as of the assets consideration
acquisition date

t
Recognised as an On subsequent After initial It results when the seller Refer chart
intangible asset selling to a third party, recognition and in a business combination given earlier
t
Amortised over acquirer shall include until the liability is contractually indemnifies the in this chapter
the remaining the carrying amount settled, cancelled or acquirer for the outcome of on contingent
contractual period of of the intangible asset FYQJSFE UIF BDRVJSFS a contingency or uncertainty consideration
the contract in which in determining the shall measure it at related to all or part of a
the right was granted gain or loss on the sale the higher of specific asset or liability

The amount that would be

In each subsequent reporting period, the acquirer shall
recognised as per Ind AS 37
t
Measure an indemnification asset on the same basis as the
indemnified liability or asset
The amount initially t
'PS BO JOEFNOJmDBUJPO BTTFU UIBU JT not subsequently
recognised less the cumulative measured at its fair value, management needs to do
amount of income recognised assessment of its collectability
as per Ind AS 115 t
Derecognise the indemnification asset only when it collects
the asset, sells it, or otherwise loses the right to it

© ICAI BOS(A) 171

SARANSH Indian Accounting Standards

Other Ind AS that Provide Guidance on Subsequent Measurement and

Accounting in a Business Combination

t
*OE "4  QSFTDSJCFT UIF BDDPVOUJOH GPS JEFOUJmBCMF JOUBOHJCMF BTTFUT BDRVJSFE JO B CVTJOFTT DPNCJOBUJPO
t
ͳF BDRVJSFS NFBTVSFT HPPEXJMM BU UIF BNPVOU SFDPHOJTFE BU UIF BDRVJTJUJPO EBUF MFTT BOZ BDDVNVMBUFE JNQBJSNFOU MPTTFT
Ind AS 36 prescribes the accounting for impairment losses

Ind AS 104 provides guidance on the subsequent accounting for an insurance contract acquired in a business combination

*OE "4  QSFTDSJCFT UIF TVCTFRVFOU BDDPVOUJOH GPS EFGFSSFE UBY BTTFUT JODMVEJOH VOSFDPHOJTFE EFGFSSFE UBY BTTFUT BOE MJBCJMJUJFT
acquired in a business combination

*OE "4  QSPWJEFT HVJEBODF PO TVCTFRVFOU NFBTVSFNFOU BOE BDDPVOUJOH GPS UIF QPSUJPO PG SFQMBDFNFOU TIBSFCBTFE QBZNFOU
awards issued by an acquirer that is attributable to employees’ future services

Ind AS 110 provides guidance on accounting for changes in a parent’s ownership interest in a subsidiary after control is obtained

Common Control Business Combinations

Applicable "QQFOEJY $ PG *OE "4  EFBMT XJUI BDDPVOUJOH GPS CVTJOFTT DPNCJOBUJPOT PG FOUJUJFT PS CVTJOFTTFT VOEFS
pronouncement common control

It is a business combination involving entities or businesses in which all the combining entities or
Definition businesses are ultimately $0/530--&% by the SAME party or parties both BEFORE and AFTER the
business combination, and that control is not transitory

Common control business combinations will include transactions, such as transfer of subsidiaries or
Inclusion
businesses, between entities within a group

t
ͳF FYUFOU PG /$* JO FBDI PG UIF DPNCJOJOH FOUJUJFT CFGPSF BOE BGUFS UIF CVTJOFTT DPNCJOBUJPOT JT not
3PMF PG /$* relevant to determine whether a combination involves entities under common control
t
1BSUJBMMZ PXOFE TVCTJEJBSZ JT BMXBZT VOEFS UIF DPOUSPM PG UIF QBSFOU FOUJUZ

It is not necessary that combining entities are included as part of the same CFS
Scope
A group of individuals shall be considered as controlling an entity when, as a result of contractual
arrangements, they collectively have the power to govern its financial and operating policies so as to
obtain benefits from its activities, and that ultimate collective power is not transitory

Accounting Business combinations involving entities or businesses under common control shall be accounted for
using the pooling of interests method

© ICAI BOS(A) 172

SARANSH Indian Accounting Standards

Method of Accounting for Common Control Business Combinations

Business combinations involving entities or businesses under common control shall be accounted for using the pooling of
interests method

"TTFUT BOE MJBCJMJUJFT PG UIF DPNCJOJOH FOUJUJFT BSF SFnFDUFE BU UIFJS carrying amounts

Only adjustments that are made are to harmonise accounting policies

/P BEKVTUNFOUT BSF NBEF UP SFnFDU GBJS WBMVFT or recognize any new assets or liabilities

/P hOFXh HPPEXJMM JT SFDPHOJ[FE as a result of the combination

Any FYQFOTFT of the combination are written off immediately in the P&L

Financial information in financial statements in respect of prior periods should be restated as if business combination had
occurred from beginning of preceding period in financial statements, irrespective of actual date of combination

)PXFWFS JG CVTJOFTT DPNCJOBUJPO IBE PDDVSSFE BGUFS UIBU EBUF QSJPS QFSJPE JOGPSNBUJPO TIBMM CF SFTUBUFE POMZ GSPN UIBU EBUF

t
$POTJEFSBUJPO GPS CVTJOFTT DPNCJOBUJPO NBZ DPOTJTU PG TFDVSJUJFT DBTI PS PUIFS BTTFUT
t
4FDVSJUJFT TIBMM CF SFDPSEFE BU OPNJOBM WBMVF
t
"TTFUT PUIFS UIBO DBTI TIBMM CF DPOTJEFSFE BU UIFJS GBJS WBMVFT

Identity of reserves shall be preserved and shall appear in financial statements of transferee in same form in which they
appeared in financial statements of transferor

General Reserve of the transferor entity becomes the General Reserve of the transferee, the Capital Reserve of the transferor
becomes the Capital Reserve of the transferee and the Revaluation Reserve of the transferor becomes the Revaluation Reserve of
the transferee. As a result of preserving the identity, reserves which are available for distribution as dividend before the business
combination would also be available for distribution as dividend after the business combination.

Difference, if any, between amount recorded as share capital issued plus any additional consideration in form of cash or other
assets and amount of share capital of transferor shall be transferred to capital reserve and should be presented separately from
other capital reserves with disclosure of its nature and purpose in the notes

© ICAI BOS(A) 173

SARANSH Indian Accounting Standards

Summary of Accounting for Common Control Business Combination

S. No. Particular Treatment
1. Method of accounting Pooling of interests method
2. Assets and liabilities of transferor company taken over by the At carrying values
transferee company
3. Adjustments in accounting of business combination Adjustments are made only to harmonise the accounting
policies
4. Financial information in financial statements in respect of prior Restated as if business combination had occurred from
periods beginning of preceding period in financial statements,
irrespective of actual date of combination.
)PXFWFS JG CVTJOFTT DPNCJOBUJPO IBE PDDVSSFE BGUFS UIBU
date, prior period information shall be restated only from
that date.
5. Reserves of transferor company Identities are preserved and shall appear in financial
statements of transferee in same form in which they
appeared in financial statements of transferor company
6. Goodwill /PU SFDPHOJTFE
7. &YQFOTFT JODVSSFE PO DPNCJOBUJPO PG CVTJOFTT 8SJUUFO Pĉ JNNFEJBUFMZ JO UIF 1SPmU BOE -PTT BDDPVOU
8. Purchase Consideration (PC) Consists of securities, cash or other assets
9. Securities given under purchase consideration Recorded at nominal value
10. Assets other than cash given under purchase consideration Considered at their fair values
11. Cash given under purchase consideration Actual value
12. Difference, if any, between amount recorded as share capital Transferred to capital reserve and should be presented
issued plus any additional consideration in form of cash or separately from other capital reserves with disclosure of its
other assets and amount of share capital of transferor
nature and purpose in the notes

Reverse Acquisitions

Issued equity shares

Say Entity A Say Entity B

Legal Acquirer Legal Acquiree

Issues no consideration

Identified as Identified as
Accounting Acquiree Accounting Acquirer
For accounting,
measure the
consideration as

Acquisition date fair value of
the consideration transferred
by the accounting acquirer for
its interest in the accounting
acquiree
Fair value of the number of equity interests
the legal subsidiary (Entity B) would have had
to issue to give the owners of the legal parent
(Entity A) the same percentage equity interest
in the combined entity that results from the
reverse acquisition

© ICAI BOS(A) 174

SARANSH Indian Accounting Standards

Preparation and Presentation of Consolidated

Financial Statements (Reverse Acquisitions)

Consolidated financial statements prepared following a reverse acquisition are issued under the name of the legal parent (accounting
acquiree)

But it is described in the notes as a continuation of the financial statements of the legal subsidiary (accounting acquirer), with
one adjustment, which is to BEKVTU SFUSPBDUJWFMZ UIF BDDPVOUJOH BDRVJSFST MFHBM DBQJUBM UP SFnFDU UIF MFHBM DBQJUBM PG UIF BDDPVOUJOH
acquiree ͳBU BEKVTUNFOU JT SFRVJSFE UP SFnFDU UIF DBQJUBM PG UIF MFHBM QBSFOU UIF BDDPVOUJOH BDRVJSFF 

Comparative information presented in those consolidated financial statements also is retroactively adjusted UP SFnFDU UIF MFHBM DBQJUBM
of the legal parent (accounting acquiree).

#FDBVTF UIF DPOTPMJEBUFE mOBODJBM TUBUFNFOUT SFQSFTFOU UIF DPOUJOVBUJPO PG UIF mOBODJBM TUBUFNFOUT PG UIF MFHBM TVCTJEJBSZ FYDFQU GPS
JUT DBQJUBM TUSVDUVSF UIF DPOTPMJEBUFE mOBODJBM TUBUFNFOUT SFnFDU

B UIF BTTFUT BOE MJBCJMJUJFT PG UIF MFHBM TVCTJEJBSZ UIF BDDPVOUJOH BDRVJSFS SFDPHOJTFE BOE NFBTVSFE BU UIFJS QSFDPNCJOBUJPO
carrying amounts.

(b) the assets and liabilities of the legal parent (the accounting acquiree) recognised and measured in accordance with this Ind AS.

(c) the retained earnings and other equity balances of the legal subsidiary (accounting acquirer) before the business combination.

(d) the amount recognised as issued equity interests in the consolidated financial statements determined by adding the issued
equity interest of the legal subsidiary (the accounting acquirer) outstanding immediately before the business combination to the
fair value of the legal parent (accounting acquiree).

F JO B SFWFSTF BDRVJTJUJPO UIF OPODPOUSPMMJOH JOUFSFTU SFnFDUT UIF OPODPOUSPMMJOH TIBSFIPMEFST QSPQPSUJPOBUF JOUFSFTU JO UIF
QSFDPNCJOBUJPO DBSSZJOH BNPVOUT PG UIF MFHBM BDRVJSFFT OFU BTTFUT even if the non-controlling interests in other acquisitions are
measured at their fair value at the acquisition date.

*O B SFWFSTF BDRVJTJUJPO TPNF PG UIF PXOFST PG UIF MFHBM BDRVJSFF UIF BDDPVOUJOH BDRVJSFS NJHIU OPU FYDIBOHF UIFJS FRVJUZ JOUFSFTUT
for equity interests of the legal parent (the accounting acquiree).
ͳPTF PXOFST BSF USFBUFE BT B OPODPOUSPMMJOH JOUFSFTU JO UIF DPOTPMJEBUFE mOBODJBM TUBUFNFOUT BGUFS UIF SFWFSTF BDRVJTJUJPO

For Earnings per Share for the current period

In calculating the weighted average number of ordinary shares outstanding (the denominator of the earnings per share calculation)
during the period in which the reverse acquisition occurs:
(a) the number of ordinary shares outstanding from the beginning of that period to the acquisition date shall be computed on the
basis of the weighted average number of ordinary shares of the legal acquiree (accounting acquirer) outstanding during the
QFSJPE NVMUJQMJFE CZ UIF FYDIBOHF SBUJP FTUBCMJTIFE JO UIF NFSHFS BHSFFNFOU BOE
(b) the number of ordinary shares outstanding from the acquisition date to the end of that period shall be the actual number of
ordinary shares of the legal acquirer (the accounting acquiree) outstanding during that period.

For Earnings per Share for the comparative period

The basic earnings per share for each comparative period before the acquisition date presented in the consolidated financial
statements following a reverse acquisition shall be calculated by dividing:
(a) the profit or loss of the legal acquiree attributable to ordinary shareholders in each of those periods by
C
UIF MFHBM BDRVJSFFT IJTUPSJDBM XFJHIUFE BWFSBHF OVNCFS PG PSEJOBSZ TIBSFT PVUTUBOEJOH NVMUJQMJFE CZ UIF FYDIBOHF SBUJP
established in the acquisition agreement

© ICAI BOS(A) 175

SARANSH Indian Accounting Standards

Main Disclosures

t
(FOFSBM JOGPSNBUJPO PO UIF CVTJOFTT DPNCJOBUJPO

t
"TTFUT BDRVJSFE BOE MJBCJMJUJFT BTTVNFE
t
(PPEXJMM PS B HBJO PO CBSHBJO QVSDIBTF
t
5SBOTBDUJPOT UIBU BSF OPU QBSU PG UIF CVTJOFTT DPNCJOBUJPO
t
*O XIJDI UIF BDRVJSFS IPMET MFTT UIBO  QFSDFOU PG UIF BDRVJSFF
t
#VTJOFTT DPNCJOBUJPOT BDIJFWFE JO TUBHFT JF TUFQ BDRVJTJUJPOT
t
1SP GPSNB JOGPSNBUJPO BCPVU SFWFOVF BOE QSPmU PS MPTT BOE
t
.FBTVSFNFOU QFSJPE BEKVTUNFOUT BOE DPOUJOHFOU DPOTJEFSBUJPO BEKVTUNFOUT
t
3FWFOVF BOE QSPmU PS MPTT PG DPNCJOFE FOUJUZ GPS DVSSFOU SFQPSUJOH QFSJPE BT UIPVHI BDRVJTJUJPO EBUF GPS BMM CVTJOFTT
combinations that occurred during the year had been as of beginning of annual reporting period
t
3FDPODJMJBUJPO PG NPWFNFOUT JO HPPEXJMM
t
0QFOJOH BNPVOUT GPS HSPTT HPPEXJMM BOE JNQBJSNFOU MPTTFT
t
"EEJUJPOBM HPPEXJMM SFDPHOJTFE JO UIF QFSJPE
t
"EKVTUNFOUT GSPN SFDPHOJUJPO PG EFGFSSFE UBY BTTFUT
t
.PWFNFOUT JO HPPEXJMM PG B AEJTQPTBM HSPVQ VOEFS *OE "4 
t
*NQBJSNFOU MPTTFT SFDPHOJTFE JO UIF QFSJPE
t
/FU FYDIBOHF EJĉFSFODFT BSJTJOH JO UIF QFSJPE
t
"OZ

PUIFS DIBOHFT BSJTJOH JO UIF QFSJPE
t
$MPTJOH BNPVOUT GPS HSPTT HPPEXJMM BOE JNQBJSNFOU MPTTFT
t
0UIFS EJTDMPTVSFT BT QSFTDSJCFE JO UIF TUBOEBSE

Carve-Out in Ind As 103 From IFRS 3

As Per IFRS

IFRS 3 requires bargain purchase gain arising on business combination to be recognised in profit or loss as income

Carve-Out

Ind AS 103 requires the bargain purchase gain to be recognised in other comprehensive income and accumulated in equity as
capital reserve

6OMFTT UIFSF JT OP DMFBS FWJEFODF GPS UIF VOEFSMZJOH SFBTPO GPS DMBTTJmDBUJPO PG UIF CVTJOFTT DPNCJOBUJPO BT B CBSHBJO QVSDIBTF JO
which case, it shall be recognised directly in equity as capital reserve

Reason for Carve-Out

Bargain purchase gain occurs at the time of acquiring a business
Recognition of such gains in profit or loss would result into recognition of unrealized gains, which may get distributed in the
form of dividends
Such a treatment may lead to structuring through acquisitions, which may not be in the interest of the stakeholders of the
company

Carve-In in Ind As 103 From IFRS 3

As Per IFRS

*'34  FYDMVEFT GSPN JUT TDPQF CVTJOFTT DPNCJOBUJPOT PG FOUJUJFT VOEFS DPNNPO DPOUSPM

Carve-In

"QQFOEJY $ PG *OE "4  Business Combinations gives guidance on business combinations of entities under
common control

© ICAI BOS(A) 176