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Thread: 03 - Indian Accounting Standard (Ind AS) 103 - Business Combinations

  1. #71
    IND-AS
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    Thumbs up Artistic-related intangible assets of Indian Accounting Standard (Ind AS) 103 - Business Combinations

    Artistic-related intangible assets of Indian Accounting Standard (Ind AS) 103


    Business Combinations

    Appendix - E


    Artistic-related intangible assets

    IE32. Examples of artistic-related intangible assets are:

    Class
    Basis
    Plays, operas and ballets
    Contractual
    Books, magazines, newspapers and other literary works
    Contractual
    Musical works such as compositions, song lyrics and advertising jingles
    Contractual
    Pictures and photographs
    Contractual
    Video and audiovisual material, including motion pictures or films, music videos and television programmes
    Contractual

    IE33. Artistic-related assets acquired in a business combination are identifiable if they arise from contractual or legal rights such as those provided by copyright. The holder can transfer a copyright, either in whole through an assignment or in part through a licensing agreement. An acquirer is not precluded from recognising a copyright intangible asset and any related assignments or licence agreements as a single asset, provided they have similar useful lives.


  2. #72
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    Thumbs up Contract-based intangible assets of Indian Accounting Standard (Ind AS) 103 - Business Combinations

    Contract-based intangible assets of Indian Accounting Standard (Ind AS) 103

    Business Combinations

    Appendix - E


    Contract-based intangible assets

    IE34. Contract-based intangible assets represent the value of rights that arise from contractual arrangements. Customer contracts are one type of contract -based intangible asset. If the terms of a contract give rise to a liability (for example, if the terms of an operating lease or customer contract are unfavourable relative to market terms), the acquirer recognises it as a liability assumed in the business combination. Examples of contract -based intangible assets are:

    Class
    Basis
    Licensing, royalty and standstill agreements
    Contractual
    Advertising, construction, management, service or supply contracts
    Contractual
    Lease agreements (whether the acquiree is the lessee or the lessor)
    Contractual
    Construction permits
    Contractual
    Franchise agreements
    Contractual
    Operating and broadcast rights
    Contractual
    Servicing contracts, such as mortgage servicing contracts
    Contractual
    Employment contracts
    Contractual
    Use rights, such as drilling, water, air, timber cutting and route authorities
    Contractual

    Servicing contracts, such as mortgage servicing contracts
    IE35. Contracts to service financial assets are one type of contract -based intangible asset. Although servicing is inherent in all financial assets, it becomes a distinct asset (or liability) by one of the following:

    (a) when contractually separated from the underlying financial asset by sale or securitisation of the assets wi th servicing retained;
    (b) through the separate purchase and assumption of the servicing.

    IE36. If mortgage loans, credit card receivables or other financial assets are acquired in a business combination with servicing retained, the inherent servicing rights are not a separate intangible asset because the fair value of those servicing rights is included in the measurement of the fair value of the acquired financial asset.

    Employment contracts
    IE37. Employment contracts that are beneficial contracts from the perspective of the employer because the pricing of those contracts is favourable relative to market terms are one type of contract -based intangible asset.

    Use rights
    IE38. Use rights include rights for drilling, water, air, timber cutting and route authorities. Some use rights are contract -based intangible assets to be accounted for separately from goodwill. Other use rights may have characteristics of tangible assets rather than of intangible assets. An acquirer should account for use rights on the basis of their nature.



  3. #73
    IND-AS
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    Thumbs up Technology-based intangible assets of Indian Accounting Standard (Ind AS) 103 - Business Combinations

    Technology-based intangible assets of Indian Accounting Standard (Ind AS) 103

    Business Combinations

    Appendix - E


    Technology-based intangible assets

    IE39. Examples of technology-based intangible assets are:

    Class
    Basis
    Patented technology
    Contractual
    Computer software and mask works
    Contractual
    Unpatented technology
    Non-contractual
    Databases, including title plants
    Non-contractual
    Trade secrets, such as secret formulas, processes and recipes
    Contractual

    Computer software and mask works
    IE40. Computer software and program formats acquired in a business combination that are protected legally, such as by patent or copyright, meet the contractual -legal criterion for identification as intangible assets.

    IE41. Mask works are software permanently stored on a read -only memory chip as a series of stencils or integrated circuitry. Mask works may have legal protection. Mask works with legal protection that are acquired in a business combination meet the contractual-legal criterion for identification as intangible assets.

    Databases, including title plants
    IE42. Databases are collections of information, often stored in electronic form (such as on computer disks or files). A database that includes original works of authorship may be entitled to copyright protection. A database acquired in a business combination and protected by copyright meets the contractual-legal criterion. However, a database typically includes information created as a consequence of an entity’s normal operations, such as customer lists, or specialised information, such as scientific data or credit information. Databases t hat are not protected by copyright can be, and often are, exchanged, licensed or leased to others in their entirety or in part. Therefore, even if the future economic benefits from a database do not arise from legal rights, a database acquired in a business combination meets the separability criterion.

    IE43. Title plants constitute a historical record of all matters affecting title to parcels of land in a particular geographical area. Title plant assets are bought and sold, either in whole or in part, in exchange transactions or are licensed. Therefore, title plant assets acquired in a business combination meet the separability criterion.

    Trade secrets, such as secret formulas, processes and recipes
    IE44. A trade secret is ‘information, including a formula, pattern, recipe, compilation, program, device, method, technique, or process that (a) derives independent economic value, actual or potential, from not being generally known and (b) is the subject of efforts that are reasonable under the circumstances t o maintain its
    secrecy.’3 If the future economic benefits from a trade secret acquired in a business combination are legally protected, that asset meets the contractual - legal criterion. Otherwise, trade secrets acquired in a business combination are identifiable only if the separability criterion is met, which is likely to be the case.

    Note -

    3
    Melvin Simensky and Lanning Bryer, The New Role of Intellectual Property in Commercial Transactions (New York: John Wiley & Sons, 1998), page 293.




    Last edited by IND-AS; 24-02-2011 at 02:08 PM.

  4. #74
    IND-AS
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    Thumbs up Gain on a bargain purchase of Indian Accounting Standard (Ind AS) 103 - Business Combinations

    Gain on a bargain purchase of Indian Accounting Standard (Ind AS) 103

    Business Combinations

    Appendix - E


    Gain on a bargain purchase

    Illustrating the consequences of recognising and measuring a gain from a bargain purchase by applying paragraphs 32–36A of Ind AS 103

    IE45. The following example illustrates the accounting for a business combination in which a gain on a bargain purchase is recognised.

    IE46. On 1 January 20X5 AC acquires 80 per cent of the equity interests of TC, a private entity, in exchange for cash of Rs 150. Because the former owners of TC needed to dispose of their investments in TC by a specified date, they did not have sufficient time to market TC to multiple potential buyers. The management of AC initially measures the separately recognisable identifiable assets acquired and the liabilities assumed as of the acquisition date in accordance with the requirements of Ind AS 103. The identifiable assets are measured at Rs 250 and the liabilities assumed are measured at Rs 50. AC engages an independent consultant, who determines that the fair value of the 20 per cent non -controlling interest in TC is Rs 42.

    IE47. The amount of TC’s identifiable net assets (Rs 200, calculated as Rs 250 – Rs 50) exceeds the fair value of the consideration transferred plus the fair v alue of the non-controlling interest in TC. The facts stated in IE46 above provide clear evidence of the underlying reasons for classifying the business combination as a bargain purchase. On making reassessment, AC concludes that it has correctly identified all of the assets acquired and all of the liabilities assumed and that no additional assets or liabilities need to be recognised. AC measures the gain on its purchase of the 80 per cent interest as follows:


    Rs
    Amount of the identifiable net assets acquired (Rs 250 – Rs 50)
    200
    Less: Fair value of the consideration transferred for AC’s 80 per cent interest in TC; plus
    150
    Fair value of non-controlling interest in TC
    42

    192
    Gain on bargain purchase of 80 per cent interest
    8

    IE48. AC would record its acquisition of TC in its consolidated financial statements as follows:


    Rs
    Rs
    Dr Identifiable assets acquired
    250

    Cr Cash

    150
    Cr Liabilities assumed

    50
    Cr Gain on the bargain purchase

    8
    Cr Equity—non-controlling interest in TC

    42

    The gain on bargain purchase will be recognised in other comprehensive income and accumulated in equity as capital reserve in accordance with paragraph 34.

    If there is no clear evidence of the underlying reason for classifying the business combination as a bargain purchase, the amount of Rs. 8 will be recognised directly in equity as capital reserve in accordance with paragraph 36A.

    IE49 If the acquirer chose to measure the non -controlling interest in TC on the basis of its proportionate interest in the identifiable net assets of the acquiree, the recognised amount of the non-controlling interest would be Rs 40 (Rs 200 x 0.20). The gain on the bargain purchase then would be Rs 10 (Rs 200 – (Rs 150 + Rs 40)).


  5. #75
    IND-AS
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    Thumbs up Measurement period of Indian Accounting Standard (Ind AS) 103 - Business Combinations

    Measurement period of Indian Accounting Standard (Ind AS) 103

    Business Combinations

    Appendix - E


    Measurement period

    Illustrating the consequences of applying paragraphs 45–50 of Ind AS 103.

    IE50. If the initial accounting for a business combination is not complete at the end of the financial reporting period in which the combination occurs, paragraph 45 of Ind AS 103 requires the acquirer to recognise in its financial statements provisional amounts for the items for which the accounting is incomplete. During the measurement period, the acquirer recognises adjustments to the provisional amounts needed to reflect new information obtained about facts and circumstances that existed as of the acquisition date and, if known, would have affected the measurement of the amounts recognised as of that date. Paragraph 49 of Ind AS 103 requires the acquirer to recognise such adjustments as if the accounting for the business combination had been completed at the acquisition date. Measurement period adjustments are not included in profit or loss.

    IE51. Suppose that AC acquires TC on 30 September 20X7. AC seeks an independent valuation for an item of property, pl ant and equipment acquired in the combination, and the valuation was not complete by the time AC approved for issue its financial statements for the year ended 31 December 20X7. In its 20X7 annual financial statements, AC recognised a provisional fair value for the asset of Rs 30,000. At the acquisition date, the item of property, plant and equipment had a remaining useful life of five years. Five months after the acquisition date, AC received the independent valuation, which estimated the asset’s acquisition date fair value as Rs 40,000.

    IE52. In its financial statements for the year ended 31 December 20X8, AC retrospectively adjusts the 20X7 prior year information as follows:

    (a) The carrying amount of property, plant and equipment as of 31 December 20X7 is increased by Rs 9,500. That adjustment is measured as the fair value adjustment at the acquisition date of Rs 10,000 less the additional depreciation that would have been recognised if the asset’s fair value at the acquisition date had been recognise d from that date (Rs 500 for three months’ depreciation).
    (b) The carrying amount of goodwill as of 31 December 20X7 is decreased by Rs 10,000.
    (c) Depreciation expense for 20X7 is increased by Rs 500.

    IE53. In accordance with paragraph B67 of Ind AS 103, AC discloses:

    (a) in its 20X7 financial statements, that the initial accounting for the business combination has not been completed because the valuation of property, plant and equipment has not yet been received.

    (b) in its 20X8 financial statements, the amounts and explanations of the adjustments to the provisional values recognised during the current reporting period. Therefore, AC discloses that the 20X7 comparative information is adjusted retrospectively to increase the fair value of the item of property, plant and equipment at the acquisition date by Rs 9,500, offset by a decrease to goodwill of Rs 10,000 and an increase in depreciation expense of Rs 500.

    Last edited by IND-AS; 24-02-2011 at 02:29 PM.

  6. #76
    IND-AS
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    Thumbs up Determining what is part of the business combination Transaction - Settlement of a pre-existing relationship of Indian Accounting Standard (Ind AS)103

    Determining what is part of the business combination Transaction - Settlement of a pre-existing relationship of Indian Accounting Standard (Ind AS) 103

    Business Combinations

    Appendix - E


    Determining what is part of the business combination Transaction

    Settlement of a pre-existing relationship

    Illustrating the consequences of applying paragraphs 51, 52 and B50 –B53 of Ind AS 103.

    IE54. AC purchases electronic components from TC under a five -year supply contract at fixed rates. Currently, the fixed rates are higher than t he rates at which AC could purchase similar electronic components from another supplier. The supply contract allows AC to terminate the contract before the end of the initial five -year term but only by paying a Rs 6 million penalty. With three years remaining under the supply contract, AC pays Rs 50 million to acquire TC, which is the fair value of TC based on what other market participants would be willing to pay.

    IE55. Included in the total fair value of TC is Rs 8 million related to the fair value of the supply contract with AC. The Rs 8 million represents a Rs 3 million component that is ‘at market’ because the pricing is comparable to pricing for current market transactions for the same or similar items (selling effort, customer relationships and so on) and a Rs 5 million component for pricing that is unfavourable to AC because it exceeds the price of current market transactions for similar items. TC has no other identifiable assets or liabilities related to the supply contract, and AC has not recognised any assets or liabilities related to the supply contract before the business combination.

    IE56. In this example, AC calculates a loss of Rs 5 million (the lesser of the Rs 6 million stated settlement amount and the amount by which the contract is unfavourable to the acquirer) separately from the business combination. The Rs 3 million ‘at-market’ component of the contract is part of goodwill.

    IE57. Whether AC had recognised previously an amount in its financial statements related to a pre-existing relationship will affect the amount recognised as a gain or loss for the effective settlement of the relationship. Suppose that Indian Accounting Standards had required AC to recognise a Rs 6 million liability for the supply contract before the business combinat ion. In that situation, AC recognises a Rs 1 million settlement gain on the contract in profit or loss at the acquisition date (the Rs 5 million measured loss on the contract less the Rs 6 million loss previously recognised). In other words, AC has in effect settled a recognised liability of Rs 6 million for Rs 5 million, resulting in a gain of Rs 1 million.



  7. #77
    IND-AS
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    Thumbs up Contingent payments to employees of Indian Accounting Standard (Ind AS) 103 - Business Combinations

    Contingent payments to employees of Indian Accounting Standard (Ind AS) 103

    Business Combinations

    Appendix - E


    Contingent payments to employees

    Illustrating the consequences of applying paragraphs 51, 52, B50, B54 and B55 of Ind AS 103

    IE58. TC appointed a candidate as its new CEO under a ten -year contract. The contract required TC to pay the candidate Rs 5 million if TC is acquired before the contract expires. AC acquires TC eight years later. The CEO was still employed at the acquisition date and will receive the additional payment under the existing contract.

    IE59. In this example, TC entered into the employment agreement before the negotiations of the combination began, and the purpose of the agreement was to obtain the services of CEO. Thus, there is no evidence that the agreement was arranged primarily to provide benefits to AC or the combined entity. Therefore, the liability to pay Rs 5 million is included in the application of the acquisition method.

    IE60. In other circumstances, TC might enter into a similar agreement with CEO at the suggestion of AC during the negotiations for the business combination. If so, the primary purpose of the agreement might be to provide severance pay to CEO, and the agreement may primarily benefit AC or the combined entity rather than TC or its former owners. In that situation, AC accounts for the liability to pay CEO in its post-combination financial statements separately from application of the acquisition method.


  8. #78
    IND-AS
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    Thumbs up Replacement awards of Indian Accounting Standard (Ind AS) 103 - Business Combinations

    Replacement awards of Indian Accounting Standard (Ind AS) 103

    Business Combinations

    Appendix - E


    Replacement awards

    Illustrating the consequences of applying paragraphs 51, 52 and B56–B62 of Ind AS 103.

    IE61. The following examples illustrate replacement awards that the acquirer was obliged to issue in the following circumstances:



    Acquiree awards
    Has the vesting period been completed before the
    business combination?


    Completed
    Not
    completed
    Replacement awards
    Are employees required to
    provide additional service after the acquisition date?
    Not required
    Required
    Example 1
    Example 4

    Example 2
    Example 3

    IE62. The examples assume that all awards are classified as equity.

    Example 1

    Acquiree awards
    Vesting period completed before the business combination
    Replacement
    awards
    Additional employee services are not required after the acquisitiondate

    IE63. AC issues replacement awards of Rs110 (market-based measure) at the acquisition date for TC awards of Rs 100 (market-based measure) at the acquisition date. No post-combination services are required for the replacement awards and TC’s employees had rendered all of the required service for the acquiree awards as of the acquisition date.

    IE64. The amount attributable to pre-combination service is the market -based measure of TC’s awards (Rs 100) at the acquisition date; that amount is included in the consideration transferred in the business combination. The amount attributable to post-combination service is Rs 10, which is the difference between the total value of the replacement awards (Rs.110) and the portion attributable to pre - combination service (Rs.100). Because no post-combination service is required for the replacement awards, AC immediately recognises Rs 10 as remuneration cost in its post-combination financial statements.


    Example 2

    Acquiree awards
    Vesting period completed before the business combination
    Replacement
    awards
    Additional employee services are
    required after the acquisition date


    IE65. AC exchanges replacement awards that require one year of post -combination service for share-based payment awards of TC, for which employees had completed the vesting period before the business combination. The market based measure of both awards is Rs 100 at the acquisition date. When originally granted, TC’s awards had a vesting period of four years. As of the acquisition date, the TC employees holding unexercised awards had rendered a total of seven years of service since the grant date.

    IE66. Even though TC employees had already rendered all of the service, AC attributes a portion of the replacement award to post -combination remuneration cost in accordance with paragraph B59 of Ind AS 103, because the replacement awards require one year of post-combination service. The total vesting period is five years—the vesting period for the original acquiree award completed before the acquisition date (four years) plus the vesting period for the replacement award (one year).

    IE67. The portion attributable to pre-combination services equals the market -based measure of the acquiree award (Rs 100) multiplied by the ratio of the pre - combination vesting period (four years) to the total vesting period (five years). Thus, Rs 80 (Rs 100 x 4/5 years) is attributed to the pre -combination vesting period and therefore included in the consideration transferred in the business combination. The remaining Rs 20 is attributed to the post-combination vesting period and is therefore recognised as remuneration cost in AC’s post - combination financial statements in accordance with Ind AS 102.

    Example 3

    Acquiree awards
    Vesting period not completed before the
    business combination
    Replacement
    awards
    Additional employee services are required after the acquisition date

    IE68. AC exchanges replacement awards that require one year of post -combination service for share-based payment awards of TC, for which employees had not yet rendered all of the service as of the acquisition date. The market-based measure of both awards is Rs 100 at the acquisition date. When originally granted, the awards of TC had a vesting period of four years. As of the acquisition date, the TC employees had rendered two years’ service, and they would have been required to render two additional years of service after the acquisition date for their awards to vest. Accordingly, only a portion of the TC awards is attributable to pre-combination service.

    IE69. The replacement awards require only one year of post -combination service. Because employees have already rendered two years of service, the total vesting period is three years. The portion attributable to pre -combination services equals the market-based measure of the acquiree award (Rs 100) multiplied by the ratio of the pre-combination vesting period (two years) to the greater of the total vesting period (three years) or the original vesting period of TC’s award (four years). Thus, Rs 50 (Rs 100 x 2/4 years) is attributable to pre-combination service and therefore included in the consideration transferred for the acquiree. The remaining Rs 50 is attributable to post-combination service and therefore recognised as remuneration cost in AC’s post -combination financial statements.

    Example 4

    Acquiree awards
    Vesting period not completed
    before the business combination
    Replacement
    awards
    Additional employee services are\ not required after the acquisitiondate

    IE70. Assume the same facts as in Example 3 above, except that AC exchanges replacement awards that require no post-combination service for share-based payment awards of TC for which employees had not yet rendered all of the service as of the acquisition date. The terms of the replaced TC awards did not eliminate any remaining vesting period upon a change in control. (If the TC awards had included a provision that eliminated any remaining vesting period upon a change in control, the guidance in Example 1 would apply.) The market - based measure of both awards is Rs 100. Because employees have already rendered two years of service and the replacement awards do not require any post-combination service, the total vesting period is two years.

    IE71. The portion of the market-based measure of the replacement awards attributable to pre-combination services equals the market -based measure of the acquiree award (Rs 100) multiplied by the ratio of the pre-combination vesting period (two years) to the greater of the total vesting period (two years) or the original vesting period of TC’s award (four years). Thus, Rs 50 (Rs 100 x 2/4 years) is attributable to pre-combination service and therefore included in the consideration transferred for the acquiree. The remaining Rs 50 is attributable to post-combination service. Because no post -combination service is required to vest in the replacement award, AC recognises the entire Rs 50 immediately as remuneration cost in the post-combination financial statements.



  9. #79
    IND-AS
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    Thumbs up Disclosure requirements of Indian Accounting Standard (Ind AS) 103 - Business Combinations

    Disclosure requirements of Indian Accounting Standard (Ind AS) 103

    Business Combinations

    Appendix - E


    Disclosure requirements

    Illustrating the consequences of applying the disclosure requirements in paragraphs 59 – 63 and B64–B67 of Ind AS 103

    IE72. The following example illustrates some of the disclosure requirements of Ind AS 103; it is not based on an actual transaction. The example assumes that AC is a listed entity and that TC is an unlisted entity. The illustration presents the disclosures in a tabular format that refers to the specific disclosure requirements illustrated. An actual footnote might present many of the disclosures illustrated in a simple narrative format.


    At 30 June 20X2

    Consideration
    Rs
    B64(f)(i)
    Cash
    5,000
    B64(f)(iv)
    Equity instruments (100,000 ordinary shares of AC)
    4,000
    B64(f)(iii);
    Contingent consideration arrangement
    1,000
    B64(g)(i)


    B64(f)
    Total consideration transferred
    10,000
    B64(p)(i)
    Fair value of AC’s equity interest in TC held before the business
    2,000

    Combination
    12,000
    B64(m)
    Acquisition-related costs (included in selling, general and administrative expenses in AC’s statement of profit and loss for the year ended 31 December 20X2)
    1,250
    B64(i)
    Recognised amounts of identifiable assets acquired and liabilities


    Assumed


    Financial assets
    3,500

    Inventory
    1,000

    Property, plant and equipment
    10,000

    Identifiable intangible assets
    3,300

    Financial liabilities
    (4,000)

    Contingent liability
    (1,000)

    Total identifiable net assets
    12,800
    B64(o)(i)
    Non-controlling interest in TC
    (3,300)

    Goodwill
    2,500
    B64(f)(iv)
    The fair value of the 100,000 ordinary shares issued as part of the consideration paid for TC (Rs 4,000) was determined on the basis of the closing market price of AC’s ordinary shares on the acquisition date.

    B64(f)(iii)
    The contingent consideration arrangement requires AC to pay the former

    B64(g)
    owners of TC 5 per cent of the revenues of XC, an unconsolidated equity investment owned by TC, in excess of Rs 7,500 for 20X3, up to a maximum

    B67(b)
    amount of Rs 2,500 (undiscounted).
    The potential undiscounted amount of all future payments that AC could be required to make under the contingent
    consideration arrangement is between Rs 0 and Rs 2,500. The fair value of the contingent consideration arrangement
    of Rs 1,000 was estimated by applying the income approach. The fair value estimates arebased on an assumed discount rate range of 20 –25 per cent and assumed probability-adjusted revenues in XC of RS 10,000–20,000. As of 31 December 20X2, neither the
    amount recognised for the contingent consideration arrangement, nor the range of outcomes or the assumptions used to develop the estimates had changed.

    B64(h)
    The fair value of the financial assets acquired includes receivables under finance leases of data networking
    equipment with a fair value of Rs 2,375. The gross amount due under the contracts is Rs 3,100, of which Rs 450 is expected to be uncollectible.

    B67(a)
    The fair value of the acquired identifiable intangible assets of Rs 3,300 is provisional pending receipt of the final valuations for those assets.

    B64(j)
    A contingent liability of RS 1,000 has been recognised for expected warranty

    B67(c)
    claims on products sold by TC during the last three years. We expect that the majority of this expenditure will be
    incurred in 20X3 and that all will be

    IAS 37.84
    incurred by the end of 20X4. The potential undiscounted amount of all

    85
    future payments that AC could be required to make under the warranty
    arrangements is estimated to be between Rs 500 and Rs 1,500. As of 31
    December 20X2, there has been no change since 30 June 20X2 in the amount recognised for the liability or any change in the range of outcomes or
    assumptions used to develop the estimates.

    B64(o)
    The fair value of the non-controlling interest in TC, an unlisted company,
    Was estimated by applying a market approach and an income approach. The
    Fair value estimates are based on:
    (a) an assumed discount rate range of 20 –25 per cent; an assumed terminal value based on a range of terminal EBITDA multiples between 3 and 5 times (or, if appropriate, based on long-term sustainable growth rates ranging from 3 to 6 per cent);
    assumed financial multiples of companies deemed to be similar to TC;
    And
    assumed adjustments because of the lack of control or lack of marketability that market participants would consider when estimating the fair value of the non-controlling interest in TC.

    B64(p)(ii)
    AC recognised a gain of Rs 500 as a result of measuring at fair value its 15
    per cent equity interest in TC held before the business combination. The
    gain is included in other income in AC’s statement of profit and loss for the
    year ending 31 December 20X2.

    B64(q)(i)
    The revenue included in the consolidated statement of profit and loss since 30 June 20X2 contributed by TC was Rs 4,090. TC also contributed profit of Rs 1,710 over the same period.

    B64(q)(ii)
    Had TC been consolidated from 1 January 20X2 the consolidated statement profit and loss would have included revenue of Rs 27,670 and profit of Rs 12,870.



  10. #80
    IND-AS
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    Thumbs up Appendix - 1 of Indian Accounting Standard (Ind AS) 103 - Business Combinations

    Appendix - 1 of Indian Accounting Standard (Ind AS) 103

    Business Combinations


    Appendix - 1

    Note
    : This Appendix is not a part of the Indian Accounting Standard. The purpose of this Appendix is only to bring out the differences between Indian Accounting Standard (Ind AS) 103 and the corresponding International Financial Reporting Standard (IFRS) 3, Business Combinations.


    Comparison with IFRS 3, Business Combinations

    1. IFRS 3 excludes from its scope business combinations of entities under common control. Ind AS 103 (Appendix C) gives the guidance in this regard. Consequently, paragraph 2 has been modified in Ind AS 103. Further, paragraphs B1-B4 of IFRS 103 have been deleted in Ind AS 103. In order to maintain consistency with paragraph numbers of IFRS 3, the paragraph numbers are retained in Ind AS 103 .

    2. The transitional provisions given in IFRS 3 have not been given in Ind AS 103, since all transitional provisions related to Ind A Ss, wherever considered appropriate have been included in Ind AS101, First-time Adoption of Indian Accounting Standards corresponding to IFRS 1, First-time Adoption of International Financial Reporting Standards, will deal with the same.

    3. IFRS 3 requires bargain purchase gain arising on business combination to be reconised in profit or loss. Ind AS 103 requires the same to be recognised in other comprehensive income and accumulated in equity as capital reserve, unless there is no clear evidence for the underlying reason f or classification of the business combination as a bargain purchase, in which case, it shall be recognised directly in equity as capital reserve. This has some consequential changes such as change in wording of paragraphs 34 and 36, paragraphs IE47 and IE48 of illustrative examples, additional disclosure in paragraph B64(n) and addition of new paragraph 36A. Cross-reference to the new paragraph 36A has been added in paragraphs B46, B64(n), Appendix E-heading above paragraph IE45 and text below paragraph IE48.

    4. Different terminology is used, as used in existing laws e.g., the term ‘balance sheet’ is used instead of ‘Statement of financial position’, ‘Statement of profit and loss’ is used instead of ‘Statement of comprehensive income’. The words ‘approved the financial statements for issue’ have been used instead of ‘authorised the financial statements for issue’ in the context of financial statements considered for the purpose of events after the reporting period.



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