Makers Ltd. acquired 65% of shares on 1 June, 20X3 in D Limited which is engaged in production of components of machinery. D Limited has 1,00,000…

CA Final · Financial Reporting · MTP · November 2026
Makers Ltd. acquired 65% of shares on 1 June, 20X3 in D Limited which is engaged in production of components of machinery. D Limited has 1,00,000 equity shares of ₹ 10 each. The quoted market price of shares of D Limited was ₹ 12 on the date of acquisition. The fair value of D Limited's identifiable net assets as on 1 June, 20X3 was ₹ 80,00,000. Makers Limited paid ₹ 50,00,000 in cash and issued 50,000 equity shares as purchase consideration on the date of acquisition. The quoted market price of Makers Limited on the date of issue is ₹ 25 per share. Makers Limited also agrees to pay additional consideration of ₹ 15,00,000, if the cumulative profit earned by D Limited exceeds ₹ 1,00,00,000 over the next three years. On the date of acquisition, D Limited assessed and determined that it is considered probable that the extra consideration will be paid. The fair value of this consideration on the date of acquisition is ₹ 9,80,000. D Limited incurred ₹ 1,50,000 in relation to the acquisition. Makers Ltd. measures non-controlling interest at fair value. How will the acquisition of D Ltd. be accounted by Makers Limited, under Ind AS 103? Prepare detailed workings and pass the necessary journal entries.

Suggested Answer and Working Notes:

Computation of Goodwill / Capital reserve on consolidation as per Ind As 103 Particulars ₹ Cost of investment: Share exchange (50,000 x 25) 12,50,000 Cash consideration 50,00,000 Contingent consideration 9,80,000 Consideration transferred at date of acquisition [A] 72,30,000 Fair value of non-controlling interest at date of acquisition [B] (1,00,000 x 35% x 12) 4,20,000 Total [C] = [A] + [B] 76,50,000 Net assets acquired at date of acquisition [D] (80,00,000) Capital Reserve [D] - [C] 3,50,000 In a business combination, acquisition-related costs (including stamp duty) are expensed in the period in which such costs are incurred and are not included as part of the consideration transferred. Therefore, ₹1,50,000 incurred by D Ltd. in relation to acquisition, will be ignored by Makers Ltd. Journal entry at the date of acquisition by Makers Limited as per Ind AS 103: ₹ ₹ Identifiable net assets Dr. 80,00,000 To Equity share capital (50,000 x 10) 5,00,000 To Securities Premium (50,000 x 15) 7,50,000 To Cash 50,00,000 To Provision for contingent consideration to D Ltd. 9,80,000 To Non-controlling Interest 4,20,000 To Gain on bargain purchase 3,50,000 OR ₹ ₹ Identifiable net assets Dr. 80,00,000 To Purchase consideration 72,30,000 To Non-controlling Interest 4,20,000 To Gain on bargain purchase 3,50,000 Note: Since ₹ 1,50,000 is incurred by D Ltd., no entry is passed for it in the books of Makers Ltd.

Topics: Ind AS 103

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