Educational Material on Ind AS 103 Business Combinations
Ind AS 103 Business Combinations : Business combination is a transaction or an event in which an acquirer obtains control of one or more businesses. A business is an integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing a return to investors (or other owners, members or participants) by way of dividends, lower costs or others economic benefits. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The acquirer is the entity that obtains control of the acquires.
Educational Material on Ind AS 103 Business Combinations
Ind AS 103 Business Combinations : Ind AS 103 defines business combination which has a wider scope whereas the existing AS 14 deals only with amalgamation. Ind AS 103 requires that for each business combination, the acquirer shall measure any non-controlling interest in the acquire either at fair value or at the non-controlling interest’s proportionate share of the esquire’s identifiable net assets. On other hand, the existing AS 14 states that the minority interest is the amount of equity attributable to minorities at the date on which investment in a subsidiary is made and it is shown outside shareholders’ equity. Under Ind AS 103, the consideration the acquirer transfers in exchange for the acquires includes any asset or liability resulting from a contingent consideration arrangement.
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Educational Material on Ind AS 103 Business Combinations
Ind AS 103 Business Combinations : Ind AS applies to a transaction or other event meets the definition of business combination does not apply to Formation of joint venture (joint control) , Acquisition of an asset or group of assets and Combination of entities or businesses under common controls.
Objectives
The objective of this Indian Accounting Standard is to improve the relevance, reliability and comparability of the information that a reporting entity provides in its financial statements about a business combination and its effects. To accomplish that, this Indian Accounting Standard establishes principles and requirements for how the acquirer:
(a) recognises and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquires;
(b)recognises and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and
(c)determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination.
Scope
This Indian Accounting Standard applies to transaction or other event that meets the definition of a business combination. This Indian Accounting Standard does not apply to:
(a) the formation of a joint venture.
(b) the acquisition of an asset or a group of assets that does not constitute a business. In such cases the acquirer shall identify and recognise the individual identifiable assets acquired (including those assets that meet the definition of, and recognition criteria for, intangible assets in Ind AS 38 Intangible Assets) and liabilities assumed. The cost of the group shall be allocated to the individual identifiable assets and liabilities on the basis of their relative fair values at the date of purchase. Such a transaction or event does not give rise to goodwill.
(c) In this standard as well as in all other Indian Accounting Standards, reference to bargain purchase gain arising on a business combination includes amounts recognised in paragraphs 34 and 36 A of this Ind AS, as the case may be, unless otherwise specified.
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Educational Material on Ind AS 103 Business Combinations
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Educational Material on Ind AS 103 Business Combinations
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