Rakesh Kumar (23 Points)10 March 2020
(Assistant Manager - Finance)
Replied 10 March 2020
There may be two scenarios:
A. The control of the Entity (i.e. subsidiary) is from the day it is formed i.e. from the date of purchase
B. The control of the Entity (i.e. subsidiary) is obtained at a later date i.e. purchased at a later date.
- In case of Case A, since the entity is subsidiary from day 1, there is no need to have bifurcation b/w Pre and post acquisition profits.
- In case of Case B, The acquisition method of accounting will be applied. In this Method the acquirer shall recognize fair value of assets and liabilities in acquiree. The difference between fair value of asset less liabilities assumed (-) Investment amount will be recognised as goodwill on the date of acquisition. Any post acquisition profits will be recognised thereafter thru profit and loss account.
Trust the above clarifies.
Replied 16 March 2020
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