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New Co. is interposed between Owners and Company A by issuing equity to Owners in exchange for Company A's equity. Owners' absolute and relative interests in net assets do NOT change. Owners' cost of investment in Company A was ₹10 lakh; Company A's total equity (capital + other equity attributable to owners) on restructuring date is ₹15 lakh. New Co. measures cost of investment in Company A at:
ANil
B₹15 lakh — carrying amount of New Co.'s share of equity items in Company A's SFS at the date of reorganisation
CFair value of Company A on that date
D₹10 lakh (owners' original cost)
Answer & Solution
Correct answer: B. ₹15 lakh — carrying amount of New Co.'s share of equity items in Company A's SFS at the date of reorganisation
Ind AS 27 paragraph 13 reorganisation criteria are met (new parent via equity-for-equity exchange + same assets/liabilities + same owners' interests). New Co. measures the cost of investment in Company A at its share of Company A's equity items in Company A's SFS — ₹15 lakh, not the owners' historical cost.
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