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ABC Ltd. incorporates a new company Super Ltd. to acquire 100% of Focus Ltd. Super Ltd. takes a commercial-rate loan from XYZ Bank, uses it to buy 100% of Focus Ltd. at fair value, can elect/remove a majority of Focus's board, and dominates Focus's management. Identify the acquirer for Ind AS 103 purposes.
AXYZ Bank, because it funded the transaction
BABC Ltd., because ABC incorporated Super Ltd.
CSuper Ltd., because it obtains control (board appointment power + dominant management) and the transaction substance does not point elsewhere
DFocus Ltd., because its shareholders received cash
Answer & Solution
Correct answer: C. Super Ltd., because it obtains control (board appointment power + dominant management) and the transaction substance does not point elsewhere
The key drivers under Ind AS 110 — power to appoint/remove majority of the governing body and ability to dominate management — sit with Super Ltd. Even though ABC incorporates Super, the acquirer is the entity that obtains control of the acquiree. ABC's involvement is at a different level. Funding source does not determine the acquirer.
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