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Reverse acquisition: legal acquirer Entity A issues 150 shares to take over Entity B; ex-B shareholders end up with 60% of combined entity (150/250). FV of Entity A share = ₹16. Entity A's identifiable net assets (FV) = current 500, non-current 1,500, current liab (300), non-current liab (400) = ₹1,300. Compute consideration effectively transferred (by accounting acquirer B) and goodwill.
APC ₹1,600 (40 notional B-shares × ₹40); goodwill ₹300
BPC ₹1,600 measured using Entity A's quoted market price for 100 of A's shares × ₹16; goodwill ₹300
CBoth A and B describe the same numeric outcome (₹1,600 / ₹300); Entity A's quoted price is the more reliable FV input
DPC = ₹2,400; goodwill ₹1,100
Answer & Solution
Correct answer: C. Both A and B describe the same numeric outcome (₹1,600 / ₹300); Entity A's quoted price is the more reliable FV input
Notional issuance approach gives 40 B-shares × ₹40 = ₹1,600. Alternative — and more reliable here — is to use Entity A's quoted 100 shares × ₹16 = ₹1,600. Both reach ₹1,600. Goodwill = 1,600 − 1,300 = ₹300.
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