Query on AS 21

Indian Accounting Standards 2092 views 5 replies

jyotsna

CA Final Article

29 Points Posted on 11 February 2008

Please give answers for my following queries:

Suppose there are 2 companies named H Ltd. and S.Ltd. H Ltd. acquired 40% shares of S. Ltd on 1/4/06 and next 20% shares of the same company as on 30/09/06. Then for the calculation of capital reserve or goodwill profit for the year 2006-07 attributale to entire 60% or profit attributable to only 20% should be bifurcated between capital and revenue profit? I m talking abt pre and post acquuisition bifurcation of profit.

Further suppose there is another one company named T Ltd. S Ltd. acquired 60% shares of this company as on 1/4/06. H Ltd. also purchased 20% shares in T Ltd. as on 31/12/06. So for the purpose of calculation of capital reserve or goodwill on the investment of H Ltd. in T Ltd. should the profit for 2006-07 attributable to 20% prior 31/12/06 entirely should be treated as capital profit? I m talking abt pre and post acquuisition bifurcation of profit.

Replies (5)

Guest

460655 Points Posted on 11 February 2008

in ur first question H ltd become the holding co. on IInd date so capital & revenue bifurcation will be done on second date first date is irrelevent for calculating capital reserve & goodwill. bt if co alredy have holding power in subsidiary on Ist date & further he purchased more stake then for 60% stake goodwill & cap. reserve caluclated with regard to Ist day position of reserve of campnay as capital reserve & revenue.

Guest

460655 Points Posted on 11 February 2008

In IInd case first CFS shall be prepared from the point of view of S Ltd. who hold holding interest in T ltd in which T ltd. and S Ltd will consolidate. while H ltd become irrelevent for such CFS and his share shall be treated as minority interest. IInd CFS which become ur final answer shall be drawn from Ist CFS. bt in this cases Don's forget treatment of share capital.

CA Sudheer

audit

116 Points Posted on 11 February 2008

Hi Jyotsna, reply for ur queries is -As per AS-21 if small invts are made over aperiod then date of latest major invt which resulted in control,should be considered as date of invt for all successive purchases and ,accordingly calculation of goodwill/capital reserve should be made.Ans for query-1 is H ltd should Capitalise profits upto the date of 30-9-06 i.e date of latest major invt which resulted in control

Mandar

CWA Sutdent

33 Points Posted on 14 May 2008

FOR CALCULATION OF MINORITY INTEREST & GOODWILL / CAPITAL RESERVE & BIFERCATION OF PROFIT IN PRE & POST ACQUISITION WHICH PROFIT MUST BE CONSIDERED ................BEFORE TAX OR AFTER TAX