On 1 st April 20X1, A Limited acquired 80% of the share capital of S Limited. On acquisition date the share capital and reserves of S Ltd. stood at…

CA Final · Financial Reporting · MTP · May 2026
On 1 st April 20X1, A Limited acquired 80% of the share capital of S Limited. On acquisition date the share capital and reserves of S Ltd. stood at 5,00,000 and - 1,25,000 respectively. A Limited paid initial cash consideration of 10,00,000. Additionally, A Limited issued 2,00,000 equity shares with a nominal value of 1 per share at current market value of 1.80 per share. It was also agreed that A Limited would pay a further sum of 5,00,000 after three years. A Limited's cost of capital is 10%. The appropriate discount factor for 1 @ 10% receivable at the end of 1 st year: 0.91 2 nd year: 0.83 3 rd year: 0.75 The shares and deferred consideration have not yet been recorded by A limited. Below are the Balance Sheet of A Limited and S Limited as at 31 st March, 20X3: A Limited (000) S Limited (000) Non-current assets: Property, plant & equipment 5,500 1,500 Investment in S Limited at cost 1,000 Current assets: Inventory 550 100 Receivables 400 200 Cash 200 50 7,650 1,850 Equity: Share capital 2,000 500 Retained earnings 1,400 300 3,400 800 Non-current liabilities 3,000 400 Current liabilities 1,250 650 7,650 1,850 Further information: (i) On the date of acquisition the fair values of S Limited's plant exceeded its book value by - 2,00,000. The plant had a remaining useful life of five years at this date; (ii) The consolidated goodwill has been impaired by - 2,58,000; and (iii) The A Limited Group, values the non-controlling interest using the fair value method. At the date of acquisition, the fair value of the 20% non-controlling interest was - 3,80,000. You are required to prepare Consolidated Balance Sheet of A Limited as at 31 st March, 20X3. (Notes to Account on Consolidated Balance Sheet is not required).

Suggested Answer and Working Notes:

Consolidated Balance Sheet of A Ltd. and its subsidiary, S Ltd. as at 31 st March, 20X3 Particulars ₹ in 000s I. Assets (1) Non-current assets (i) Property Plant & Equipment (W.N.4) 7,120.00 (ii) Intangible asset – Goodwill (W.N.3) 1,032.00 (2) Current Assets (i) Inventories (550 + 100) 650.00 (ii) Financial Assets (a) Trade Receivables (400 + 200) 600.00 (b) Cash & Cash equivalents (200 + 50) 250.00 Total Assets 9,652.00 II. Equity and Liabilities (1) Equity (i) Equity Share Capital (2,000 + 200) 2,200.00 (ii) Other Equity (a) Retained Earnings (W.N.6) 1190.85 (b) Securities Premium 160.00 (2) Non-Controlling Interest (W.N.5) 347.40 (3) Non-Current Liabilities (3,000 + 400) 3,400.00 (4) Current Liabilities (W.N.8) 2,353.75 Total Equity & Liabilities 9,652.00 Notes: 1. Since the question required not to prepare Notes to Account, the column of Note to Accounts had not been drawn. Working Notes: 1. Calculation of purchase consideration at the acquisition date i.e. 1 st April, 20X1 ₹ in 000s Payment made by A Ltd. to S Ltd. Cash 1,000.00 Equity shares (2,00,000 shares x 1.80) 360.00 Present value of deferred consideration (₹ 5,00,000 x 0.75) 375.00 Total consideration 1,735.00 2. Calculation of net assets i.e. net worth at the acquisition date i.e. 1 st April, 20X1 ₹ in 000s Share capital of S Ltd. 500.00 Reserves of S Ltd. 125.00 Fair value increase on Property, Plant and Equipment 200.00 Net worth on acquisition date 825.00 3. Calculation of Goodwill at the acquisition date i.e. 1 st April, 20X1 and 31 st March, 20X3 ₹ in 000s Purchase consideration (W.N.1) 1,735.00 Non-controlling interest at fair value (as given in the question) 380.00 2,115.00 Less: Net worth (W.N.2) (825.00) Goodwill as on 1 st April 20X1 1,290.00 Less: Impairment (as given in the question) 258.00 Goodwill as on 31 st March 20X3 1,032.00 4. Calculation of Property, Plant and Equipment as on 31 st March 20X3 A Ltd. ₹ in 000s 5,500.00 S Ltd. 1,500.00 Add: Net fair value gain not recorded yet 200.00 Less: Depreciation [(200/5) x 2] (80.00) 120.00 1,620.00 7,120.00 5. Calculation of Post-acquisition gain (after adjustment of impairment on goodwill) and value of NCI as on 31 st March 20X3 ₹ in 000s ₹ in 000s NCI (20%) A Ltd. (80%) Acquisition date balance 380.00 Nil Closing balance of Retained Earnings 300.00 Less: Pre-acquisition balance (125.00) Post-acquisition gain 175.00 Less: Additional Depreciation on PPE [(200/5) x 2] (80.00) Share in post-acquisition gain 95.00 19.00 76.00 Less: Impairment on goodwill 258.00 (51.60) (206.40) 347.40 (130.40) 6. Consolidated Retained Earnings as on 31 st March 20X3 ₹ in 000s A Ltd. 1,400.00 Add: Share of post-acquisition loss of S Ltd. (W.N.5) (130.40) Less: Finance cost on deferred consideration (37.5 + 41.25) (W.N.7) (78.75) Retained Earnings as on 31 st March 20X3 1,190.85 7. Calculation of value of deferred consideration as on 31 st March 20X3 ₹ in 000s Value of deferred consideration as on 1 st April 20X1 (W.N.1) 375.00 Add: Finance cost for the year 20X1-20X2 (375 x 10%) 37.50 412.50 Add: Finance cost for the year 20X2-20X3 (412.50 x 10%) 41.25 Deferred consideration as on 31 st March 20X3 453.75 8. Calculation of current Liability as on 31 st March 20X3 ₹ in 000s A Ltd. 1,250.00 S Ltd. 650.00 Deferred consideration as on 31 st March 20X3 (W.N.7) 453.75 Current Liability as on 31 st March 20X3 2,353.75

Topics: Ind AS 110

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