Ind AS 103 does not apply to the following:
the formation of a joint arrangementthe acquisition of an asset or group of assets that is not a business as defined acquisition by an investment entity
(Though IFRS 3, Business Combination scopes out the accounting for combination of entities or business under common control but Ind AS 103 has included this in Appendix C).
Acquisition Method
Business combinations are accounted for using the acquisition method, i.e., identifying the acquirer; (the acquirer is the entity that obtains control of another entity);determining the acquisition date;(the date on which the acquirer obtains control);recognise and measure the identifiable assets acquired and the liabilities assumed and any non-controlling interest; andrecognise and measure any goodwill or bargain
Recognition and Measurement Principle
To qualify for recognition, the identifiable assets acquired and liabilities assumed by the acquirer must meet the definitions of assets and liabilities in the Framework for the Preparation and Presentation of Financial Statements in accordance with Indian Accounting Standard at the acquisition date. The acquirer shall measure the identifiable assets acquired and the liabilities assumed at their acquisition-date fair values.
Exceptions to the Recognition Principles
Contingent Liabilities the acquirer shall recognise if it is a present obligation that arises from past events and its fair value can be measured reliably Exceptions to the Recognition and Measurement Principles Income taxes deferred tax assets or liabilities arising from acquired assets or liabilities accounted in Employee benefits accounted in accordance with Ind AS 19 Indemnification assets Shall be measured and recognized on the basis of the indemnified item Exceptions to the Measurement Principles Reacquired rights measured at fair value based on remaining contractual term ignoring the fair value effect of renewal Share-based payment transactions measured in accordance with Ind AS 102(Market Based Measure) Assets held for sale measured in accordance with Ind AS 105 (i.e., fair value less costs to sell)
Recognition and measurement of Goodwill or Bargain Purchase
Goodwill is measured as the difference between the consideration transferred in exchange for the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. In extremely rare circumstances, an acquirer will make a bargain purchase in a business combination, where the value of acquired identifiable assets and liabilities exceeds the consideration transferred; the acquirer shall recognize a gain (bargain purchase). The gain shall be recognized by the acqu irer in Other Comprehensive Income on the acquisition date and accumulate the same in equity as capital reserve, if there exists a clear evidence of the underlying reasons for classifying the business combination as a bargain purchase. If there does not exist clear evidence of the underlying reasons for classifying the business combination as a bargain purchase, then the gain shall be recognised directly in equity as capital reserve.
Difference Between AS 14 and Ind AS 103
Reverse Acquisitions
A reverse acquisition occurs when the entity that issues securities (the legal acquirer) is identified as the acquiree for accounting. The entity whose equity interests are acquired (the legal acquiree) must be the acquirer for accounting purposes for the transaction to be considered a reverse acquisition.
Measurement Period
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the acquirer shall report in its financial statements provisional amounts for the items for which the accounting is incomplete. During the measurement period, the acquirer shall retrospectively adjust the provisional amounts recognized and additional assets and liabilities that existed at the acquisition date to reflect new information obtained.
- Pooling of Interest Method and 2) Purchase Method
The measurement period ends as soon as the acquirer receives the information it was seeking or learns that more information is not obtainable. The measurement period shall not exceed one year from the acquisition date.
Subsequent measurement and accounting
In general, 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 for those items, depending on their nature. However, 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 rights;contingent liabilities recognised as of the acquisition date;indemnification assets; andcontingent
Business combinations of entities under common control
Common control business combination means a business combination involving entities or businesses in which all the combining entities or businesses are ultimately controlled by the same party or parties both before and after the business combination, and that control is not transitory. Business combinations involving entities or businesses under common control shall be accounted for using the pooling of interests method. The pooling of interest method is considered to involve the following:
The assets and liabilities of the combining entities are reflected at their carryingNo adjustments are made to reflect fair values, or recognise any new assets or The only adjustments that are made are to harmonise accounting policies.The financial information in the financial statements in respect of prior periods should be restated as if the business combination had occurred from the beginning of the preceding period in the financial statements, irrespective of the actual date of the However, if business combination had occurred after that date, the prior period information shall be restated only from that date.The balance of the retained earnings appearing in the financial statements of the transferor is aggregated with the corresponding balance appearing in the financial statements of the Alternatively, it is transferred to General Reserve, if any.The identity of the reserves shall be preserved and shall appear in the financial statements of the transferee in the same form in which they appeared in the financial statements of theThe difference, if any, between the amounts recorded as share capital issued plus any additional consideration in the form of cash or other assets and the amount of share capital of the 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.
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