An NCLT scheme can create goodwill or intangible assets on the transferee company’s balance sheet. The accounting treatment depends on whether the scheme is a business combination under Ind AS 103 or a common control transaction under Appendix C.
The Goodwill
In a business combination, the goodwill is recognised as the excess of the consideration over the fair value of the net identifiable assets acquired. Under Ind AS 103, the goodwill is not amortised; it is tested for impairment annually under Ind AS 36. In a common control transaction, no goodwill is recognised, and the difference is adjusted in the reserves.
The Intangible Assets
The intangible assets acquired in a business combination are recognised at fair value, and they are amortised over their useful lives. The intangible assets with an indefinite useful life are not amortised, and they are tested for impairment annually.
The NCLT-Approved Treatment
The NCLT scheme may prescribe a specific treatment for the goodwill, including the amortisation over a specified period. The company must follow the scheme’s terms, and it must disclose the treatment in its financial statements. The NCLT has approved schemes that discontinued the amortisation of goodwill and required the annual impairment testing.
A technically sound post-scheme accounting recognises the goodwill and the intangible assets, applies the correct amortisation and impairment, and discloses the treatment in the financial statements.
Call to Action
Anuj Desai & Associates advises companies on the accounting for goodwill and intangible assets arising from an NCLT scheme—from the recognition and the amortisation to the impairment testing and the NCLT-approved treatment. If your scheme creates goodwill, we can help you structure the accounting.
📧 office@anujdesaiassociates.com
📞 9619456656
🌐 https://anujdesaiassociates.com
🔗 linkedin.com/in/ca-anuj-desai-122547230
Article 298