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Company D is a development-stage entity with research engineers, a patent application pending, advanced licensing negotiations and a viable plan to commercialise. Company A pays ₹600 mn for 60% of Company D (identifiable net assets ₹750 mn). Should A treat this as a business combination under Ind AS 103?
ANo, because Company D does not yet earn revenue
BYes, because the set of activities and assets is integrated and capable of producing outputs and A has paid an implicit premium for control, indicating goodwill
CNo, because Company A paid less than its share of identifiable net assets
DYes, but only if Company D had at least one signed customer contract at acquisition
Answer & Solution
Correct answer: B. Yes, because the set of activities and assets is integrated and capable of producing outputs and A has paid an implicit premium for control, indicating goodwill
Ind AS 103 does not require current revenue; outputs are not required for an integrated set to qualify as a business. The combination of workforce, IP, viable commercialisation plan and access to customers, with a premium paid for the 60% controlling stake, indicates a business has been acquired.
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