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ACCOUNTING ASPECTS OF CORPORATE RESTRUCTURING CHAPTER
Q1. The accounting treatment of Mergers and Acquisitions has undergone drastic change with the introduction of IND-AS 103 - Business Combination. Comment [Dec. 2019 - New Syllabus - 5 Marks] OR
Auditor of Jumbo Ltd. has informed following to the Board of directors:
(
i) Tax neutrality of a demerger may get affected on adoption of INDAS 103.
(ii) Appointed Date has lost relevance if a company accounts the transaction accordance with IND-AS 103.
Examine the correctness of the observations made by the auditor. [Dec. 2022, 3 Marks]
Ans. -
(a) Method of Accounting for business combination-
(b) Appointed date v. Effective date
(c) Accounting for goodwill
Q2. How goodwill and capital reserve are differentiated as per AS-14? [Dec. 2019 - New Syllabus - 3 Marks]
Ans.
Q3. Accounting Standard-14 is applicable to demerger. [June 2019 - Old Syllabus - 3 Marks]
Ans.
Sony India Private Limited (Sony India) and Sony Software Centre Private Limited (Sony Software) Gallops Realty Pvt. Ltd
Q4. “Accounting treatment under AS 14 is confined to Amalgamations unlike Ind AS 103.” Discuss how far Ind AS 103 can be distinguished with AS 14. [Dec. 2017, Dec 2018 - Old Syllabus - 5 Marks]
Ans. -
Q5. Is it possible to retain the same characters of various reserves of transferor Companies post amalgamation, mergers or demergers as per Standards of Accounting concepts or conventions?
[Dec. 2018 - Old Syllabus - 5 Marks]
Ans.
Q6. Describe the ‘pooling of interests method’ of accounting adopted by amalgamated company. [Dec. 2016 - Old Syllabus - 5 Marks]
Ans.
Period Items and Changes in Accounting Policies
Q7. What is meant by ‘goodwill on amalgamation’? Which factors are to be taken into account in estimating useful life of goodwill?
[Dec. 2016 - Old Syllabus - 5 Marks]
Ans.
Q8. “Certain disclosures are required to be made in the first financial statements prepared after the amalgamation orders.” Mention such disclosures. [June 2016 - Old Syllabus - 5 Marks]
Ans. -
pooling of interest method -
purchase method,
Q9. Briefly explain the provisions regarding accounting treatment in the books of the Transferee Company on amalgamation where Indian Accounting Standard - 103 (Business Combinations of Entities under Common Control) is applicable. [Dec. 2021 - New Syllabus - 5 Marks]
Ans.
OTHER IMPORTANT QUESTIONS
Q10. Distinguish between Pooling of Interest Method and Purchase Method
Ans.
7.10
Sr. Pooling of Interest Method
Purchase Method
Q11. Is external reconstruction superior to internal reconstruction? [Dec. 2020 - New Syllabus - 5 Marks]
Ans.
(1) External Reconstruction
(2)
Internal Reconstruction
Q12. There are certain departures in accounting aspects dealing with amalgamations or mergers as per IFRS-3 in comparison to IND-AS 103. Enlist such variations briefly. [June 2021 - New Syllabus - 5 Marks]
Ans.
Q13. When does goodwill arise on amalgamation? Comment on its amortization. How will you estimate the useful life of the goodwill? Differentiate goodwill and capital reserve as per AS-14.
[Dec. 2021 - New Syllabus - 5 Marks]
Ans.
Q14. X Ltd. is considering the proposal to acquire Y Ltd. and their financial information is given below :
X Ltd. intend to pay ` 1,40,00,000 in cash for Y Ltd., if Y Ltd.’s market price reflects only its value as a separate entity, calculate the cost of merger :
(
i) When merger is financed by cash.
(ii) When merger is financed by stock. (Assume that X Ltd. agrees to exchange 5,00,000 shares in exchange of shares in Y Ltd. instead of payment of cash of ` 1,40,00,000).
[June 2022 - New Syllabus - 5 Marks]
Ans.
(i) When merger financed in Cash: =
(ii) When merger financed by stock: Given; 1. 2. . 3. 4.