ABC Ltd. acquired 5% equity shares of XYZ Ltd. for 10 crores in the year 20X1-20X2. The company is in process of preparing the financial statements…

CA Final · Financial Reporting · MTP · September 2025
ABC Ltd. acquired 5% equity shares of XYZ Ltd. for 10 crores in the year 20X1-20X2. The company is in process of preparing the financial statements for the year 20X2-20X3 and is assessing the fair value at subsequent measurement of the investment made in XYZ Ltd. Based on the observable input, ABC Ltd. identified a similar nature of transaction in which PQR Ltd. acquired 20% equity shares in XYZ Ltd. for 60 crores. The price of such transaction was determined on the basis of Comparable Companies Method (CCM)- Enterprise Value (EV) / EBITDA which was 8. For the current year, the EBITDA of XYZ Ltd. is 40 crores. At the time of acquisition, the valuation was determined after considering 5% of liquidity discount and 5% of non-controlling stake discount. What will be the fair value of ABC Ltd.'s investment in XYZ Ltd. as on the balance sheet date?

Suggested Answer and Working Notes:

Determination of Enterprise Value of XYZ Ltd. Particulars ₹in crore EBITDA as on the measurement date 40 EV/EBITDA multiple as on the date of valuation 8 Enterprise value of XYZ Ltd. 320 Determination of subsequent measurement of XYZ Ltd. Particulars ₹in crore Enterprise Value of XYZ Ltd. 320 ABC Ltd.'s share based on percentage of holding (5% of 320) 16 Less: Liquidity discount & Non-controlling stake discount (5%+5%=10%) (1.6) Fair value of ABC Ltd.'s investment in XYZ Ltd. 14.4

Topics: Ind AS 113

Open in Interactive Practice Hub · Full Practice Hub · Chapter Weightage · More in this subject

Related Questions in this Topic