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Company A acquires Company P, which owns three single-tenant industrial warehouses on long leases. Basic maintenance and security are outsourced. The administrator (a part-time employee of the prior parent) does NOT transfer with the deal. Most defensible accounting under Ind AS 103?
ABusiness combination, because Company P holds operating real estate assets
BBusiness combination, because investment property generates returns for investors
CBusiness combination, because Company P generates rental revenue
DAsset acquisition, because the ancillary services (maintenance/security/administration) are not critical and can be replaced without significant cost
Answer & Solution
Correct answer: D. Asset acquisition, because the ancillary services (maintenance/security/administration) are not critical and can be replaced without significant cost
For investment property held passively with outsourced ancillary services that are NOT critical and easily replaceable, the integrated process is missing. Ind AS 103 expects acquired processes to be substantive — the chapter explicitly cites such a scenario as an asset acquisition.
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