Ind AS 103

Question 1

When does BC occur ?

Answer 1

When an entity acquires control over a business

Question 2

What is business?

Answer 2

Integrated set of activities and assets which are capable of being managed in a particular manner in order to generate returns to the owners. ( It has an ability to produce output/ returns )

Question 3

Elements of control

Answer 3

1. Power to direct relevant activites
2. Exposure to variable returns
3. Linkage between such power and variable returns

Question 4

Should protective rights be considered for control

Answer 4

No

Question 5

Where is power derived from

Answer 5

Existing rights , that are substantial and give a current ability to direct relevant activites

Question 6

What are relevant activites

Answer 6

Operating and financing activities that significantly affect return of the company

Question 7

In a business purchase assets are recorded at (1) and transaction cost is rooted through (2) and goodwill is (3)

Answer 7

1. Fair value
2. P&L
3. Recorded

Question 8

What is substantiative regulatory approval

Answer 8

Regulator has power to cancel acquisition and date of regulatory approval is acquisition date

Question 9

What is acquisition date on step up acquisition

Answer 9

Date of acquiring controlling power (e.g. more than 50 percent share )

Question 10

Assets which are part of Purchase consideration , should be remeasured to (1) in books of acquirer and profit or Loss should be taken to (2)

Answer 10

1. Fair value

2. Profit and Loss

Question 11

In replacement awards , precombination allocation should be part of (1)
And post combination allocation to be part of (2)

Answer 11

1. PC

2. Employee benefit expenses

Question 12

What is pre combination allocation value?
What is post combination allocation value?

In replacement awards

Answer 12

1. Fair value of original awards on acquisition date* (vesting period/ Longer of original vesting period or total revised vesting period)
2. Fair value of replacement awards - pre combination allocation value

Question 13

Purchase consideration formula

Answer 13

Fair value of assets / shares / debentures, preference shares , etc given up
+ Present value of deferred consideration
+ Fair value of contingent consideration on acquisition date
+ Fair value of pre combination allocation

Question 14

Existing investment should be considered in PC?

Answer 14

Yes , at fair value

Question 15

How to calculate full goodwill and partial goodwill?

Answer 15

Full goodwill = FV of NCI ( FV of NCI method)
Partial goodwill= NCI stake * Fair value of net assets acquired as on acquisition date ( Proportionate net assets method)

Question 16

How to compute goodwill and what are steps in case of negative goodwill

Answer 16

Goodwill= purchase consideration + NCI - net assets taken over

If goodwill is negative:

1. Reasses fair value of PC , NCi , net assets
2. If still negative- find reasons such as forced sale, regulator order, distress sale- take to gain in bargain purchase (OCI)
3. If no reason then take to capital reserve

Question 17

Expenses in business combination i.e, any type of transaction cost should be expensed or included in purchase consideration

Answer 17

Expensed to P&L

Question 18

Steps in business combination

Answer 18

1. Date of acquisition
2. Acquirer
3. Purchase consideration
4. Newer assets taken over
5. Non controlling asset
6. Goodwill

Question 19

Should existing investments be considered for purchase consideration and at what value

Answer 19

Existing investments should be remeasured to Fairvalue in books of acquirer and then considered in PC at fair value.

Gain or lose on remeasurement to be taken to:

1. Cost / carrying value: P/L
2. FVTPL - PL
3. FVOCI - OCI

Question 20

Deferred tax adjustment affect which step

Answer 20

1. Net assets taken over = net assets before adjustment - deferred tax liability

Or

Net assets taken over = net assets before adjustment + deferred tax asset

Question 21

1. When to calculate deferred tax adjustment
2. How to Calculate the adjustment
3. How to identify if it is an asset or liability

Answer 21

1. When tax rate and caring value and fair value of assets in book of acquirer is given
2. Difference between fair value and caring value * tax rate
3. It is a liability of Fair value is greater than carrying value , otherwise asset

Question 22

Non replacement awards and replacement awards - difference in treatment ?

Answer 22

Computation of pre and post combination allotment is same but in non replacement awards , NCI is credited instead of SBP reserve in both pre and post combination journal entries.

Question 23

Should consideration for existing relationship and continent consideration for employee service be included in purchase consideration

Answer 23

No

Question 24

Existing relationship value should be taken at:

1. Non - contractual ( Lawsuit)
2. Contractual

Answer 24

1. Fair value
2. Lower of a. Fair value - Carrying value
   b. Settlement Value

Question 25

In process R&D should be recorded when and how

Answer 25

Irrespective of whether it is capitalised or expensed in books of acquiree it should be recognised at fair value as intangible asset in the books of acquirer

Question 26

Two conditions to be satisfied to remeasure goodwill recognised at acquisition date

Answer 26

1. New information obtained should confirm a condition existing on Acquisition date 2. Such adjustment to be made based on additional information obtained within 1 year

Question 27

What is common control combination and where is it specified?

Answer 27

Common control combination is where business are ultimately controlled by same party both before and after combination and is given in appendix to Ind AS 103

Question 28

For CCC , assets and liabilities are taken over at (1) and (2) are taken over. Purchase consideration is taken at (3) value and if that is not available then at (4). The difference between PC and net assets goes to (5)

Answer 28

1. Nominal value 2. Reserves - other equity 3. Nominal value ( e.g.issue price of shares ) 4 fair value 5 capital reserve on restructuring ( gain / loss)