An NCLT scheme of amalgamation is a business combination, and it is accounted for under Ind AS 103 unless the combining entities are under common control. The accounting determines the transferee company’s balance sheet, the goodwill, and the future earnings.
The Acquisition Method
Ind AS 103 requires the acquirer to apply the acquisition method: identify the acquirer, determine the acquisition date, recognise and measure the identifiable assets acquired and the liabilities assumed at fair value, and recognise and measure the goodwill or the gain from a bargain purchase.
The Acquisition Date
The acquisition date is the date on which the acquirer obtains control of the acquiree. For an NCLT scheme, the MCA’s General Circular No. 09/2019 clarifies that the appointed date specified in the scheme may be the acquisition date for Ind AS 103 purposes, and the NCLT-approved appointed date is the date that is relevant for the accounting treatment.
The Goodwill
The goodwill is measured as the difference between the consideration transferred and the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. Where the difference is negative, the acquirer recognises a gain from a bargain purchase.
A technically sound NCLT scheme accounting identifies the acquirer, determines the acquisition date, allocates the purchase price, and computes the goodwill in accordance with Ind AS 103.
Call to Action
Anuj Desai & Associates advises companies on the Ind AS 103 accounting for an NCLT scheme—from the acquisition method and the acquisition date to the purchase price allocation and the goodwill computation. If your scheme involves a business combination, we can help you structure the accounting.
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