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ABC acquired XYZ on 15 Jan 20X1. A customer penalty dispute was ongoing pre-acquisition; ABC recognised a ₹1 cr provisional liability. In October 20X1 (still within measurement period) new information indicates fair value of the liability at acquisition date was ₹2 cr. In February 20X2 (after measurement period closes) further information indicates ₹1.9 cr at acquisition date, while Ind AS 37 value at Feb 20X2 is ₹2.2 cr. The correct accounting is:
AIn Oct 20X1: retrospectively adjust to ₹2 cr (revise goodwill). In Feb 20X2: post-measurement-period change uses Ind AS 37 — recognise the further movement (₹2.2 − 2 = ₹0.2 cr) in P&L; do NOT retrospectively change the ₹2 cr
BIn Oct: do nothing. In Feb: retrospectively restate to ₹1.9 cr via goodwill
CBoth adjustments go to retained earnings
DIn Oct: charge to P&L. In Feb: retrospectively restate goodwill
Answer & Solution
Correct answer: A. In Oct 20X1: retrospectively adjust to ₹2 cr (revise goodwill). In Feb 20X2: post-measurement-period change uses Ind AS 37 — recognise the further movement (₹2.2 − 2 = ₹0.2 cr) in P&L; do NOT retrospectively change the ₹2 cr
During measurement period: adjust provisional amount (₹1 → ₹2 cr) with corresponding goodwill restatement. After measurement period closes: subsequent movements (including a later assessment that the acquisition-date value 'really' was ₹1.9 cr) are NOT retrospective — they flow through P&L per Ind AS 37, with the liability being remeasured prospectively.
Related questions
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