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ABC Ltd. negotiates to acquire XYZ Ltd. The contract is signed on 1 March 20X1 and ABC obtains power to control XYZ on that date. However, the contract says the acquisition is 'effective from 1 January 20X1' and ABC is entitled to profits from that date with the price based on net assets at 1 January 20X1. The acquisition date is:
A1 January 20X1, because the contract makes it effective from that date
B31 March 20X1, the end of the financial year
CThe date the price is settled in cash
D1 March 20X1, because that is when ABC obtains power over the relevant activities of XYZ
Answer & Solution
Correct answer: D. 1 March 20X1, because that is when ABC obtains power over the relevant activities of XYZ
Contractual 'effective dates' or backdated economic entitlements do NOT determine the acquisition date under Ind AS 103/110 — only the date control actually passes. Power-over-relevant-activities here arises on 1 March 20X1. The earlier price reference date is just a pricing mechanism.
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