INTERNATIONAL FINANCIAL REPORTING STANDARDS

(IFRS)
SOLVED QUESTION PAPER – NOV / DEC 2017

SECTION – A (2 MARKS)

a. Write any two demerits of IFRS.

 It would increase the cost of implementation for small businesses.
 It would lead to concerns with standards manipulation.
 It would require global consistency in auditing and enforcement.
 It would increase the amount of work placed on accountants.

b. What are the criteria for investment properties?

 The definition of Investment Property.
 It is probable that future economic benefits ill flow to the entity.
 The cost is reliably measurable.
 The property under construction, which will be used as Investment Property in future.

c. List the items included in the shareholders’ fund.

Four components that are included in the shareholders' equity calculation are outstanding
shares, additional paid-in capital, retained earnings, and treasury stock.

d. What is cost of sales?

Cost of sales (also known as cost of revenue) and COGS both track how much it costs to
produce a good or service. These costs include direct labor, direct materials such as raw materials,
and the overhead that's directly tied to a production facility or manufacturing plant.

e. How do you treat pre-acquisition profit or loss?

Pre-acquisition profit is the profit earned by the company before it is being acquired. It
is treated as capital profit and not revenue profit and is not available for distribution of dividend.

f. What do you mean by unrealized profits?

An unrealized gain is a potential profit that exists on paper, resulting from an investment. It
is an increase in the value of an asset that has yet to be sold for cash, such as a stock position that
has increased in value but still remains open. A gain becomes realized once the position is sold for
a profit.
g. What is meant by related party transaction?
The term related-party transaction refers to a deal or arrangement made between
two parties who are joined by a preexisting business relationship or common interest.
In business, a related party transaction is a transaction that takes place between two parties
who hold a pre-existing connection prior to the transaction.

SECTION – B (6 MARKS)
2. List out any nine international accounting standards issued by IASB.
IFRS 1 First-time Adoption of Indian Accounting Standards
IFRS 2 Share-based Payment
IFRS 3 Business Combinations
IFRS 4 Insurance Contracts
IFRS 5 Non-current Assets Held for Sale and Discontinued Operations
IFRS 6 Exploration for and Evaluation of Mineral Resources
IFRS 7 Financial Instruments: Disclosures
IFRS 8 Operating Segments
IFRS 9 Financial Instruments
IFRS 10 Consolidated Financial Statements
IFRS 11 Joint Arrangements
IFRS 12 Disclosure of Interests in Other Entities
IFRS 13 Fair Value Measurement
IFRS 14 Regulatory Deferral Accounts
IFRS 15 Revenue from Contracts with Customers

3. Narrate the disclosure under insurance contracts as per Ind. AS 104.

A contract under which an insurer accepts significant insurance risk from policyholder by
agreeing to compensate the policyholder if a specified uncertain future event affects adversely.
An insurer shall disclose information that identifies and explains the amounts invested its
financial statements arising from the insurance contract.
An insurer shall disclose information that enables the users to evaluate the nature and extent
of risks arising from the insurance contract.
• ACCOUNTING POLICIES
Premiums,
Charges & Expenses,
Claim benefits,
Embedded options & guarantees,
Reinsurance
 • ASSETS, LIABILITIES, INCOME & EXPENSES
Disclosure on insurance contracts specifically
Gains or losses on buying reinsurance

• SIGNIFICANT ASSUMPTIONS AND SOURCES OF UNCERTAINTY

Process of determining assumptions most significantly affecting assets, liabilities,
income and expenses,
Where possible, quantified disclosure of assumptions

• CHANGES IN ASSUMPTIONS
Effect of change
Consistent with Ind AS 8 -> disclosure of nature and extent of change in accounting
estimate (current period or in future)

• CREDIT RISKS
Financial loss due to reinsurer default
Impairment of reinsurance assets
Loss on balances due from agents or brokers

4. X Ltd, obtained a loan of Rs.6,00,000 on 1st April, 2916 form Vijaya bank, to be
capitalized as under:
Construction of company building – Rs.20,00,000
Purchase of Plant and Machinery – Rs.15,00,000
Working capital required – Rs.10,00,000
Purchase of vehicle – Rs.15,00,000
In March 2017, construction of company building was completed and plant and
machinery was ready for its intended use. Total interest charged by vijaya bank for the
financial year ending 31st March, 2017 was Rs.7,20,000. How do you treat the total interest
charged on loan?

CALCULATION OF EFFECTIVE RATE OF INTEREST

Effective Rate Of Interest = Total Interest / Total Loan x 100
Effective Rate Of Interest = 7,20,000 / 6,00,000 x 100
Effective Rate Of Interest = 12%

CALCULATION OF TOTAL INTEREST CHARGED ON LOAN

SL.NO PARTICULARS LOAN AMOUNT RATE OF INTEREST BORROWING COST

1 Construction of company building 20,00,000 12% 2,40,000

2 Purchase of Plant and Machinery 15,00,000 12% 1,80,000
3 Working capital required 10,00,000 12% 1,20,000
4 Purchase of vehicle 15,00,000 12% 1,80,000
TOTAL INTEREST CHARGED ON LOAN 7,20,000
5. From the following particulars of M/s Ravinandan Ltd, prepare a statement of P/L for the
year ended 31st March, 2017 as per schedule III of companies act, 2013.
PARTICULARS AMOUNT
Revenue from operations 1,00,000
Printing and stationery 2,000
Advertisement 4,000
Salaries and allowances 6,000
Interest on long term loans 4,500
Goodwill written off 1,500
Material consumed 35,000
Discount allowed 1,000
Interest on investment received 1,500
Depreciation on fixed assets 2,000

STATEMENT OF PROFIT AND LOSS ACCOUNT OF Mr. Ravinandan company as

on 31st March 2019
PARTCULARS AMOUNT AMOUNT
1. Revenue from operations 1,00,000
2. ADD: Other incomes (Interest on investment received) 1,500
3. TOTAL REVENUE (A) 1,01,500
4. EXPENSES
a. Cost of materials consumed 35,000
b. Purchase of stock in trade NIL
c. Changes in inventories NIL
d. Employee benefits - Salaries and allowances 6,000
e. Finance Cost - Interest on long term loans 4,500
f. Depreciation on fixed assets 2,000
g. Other Expenses 8,500
TOTAL EXPENSES (B) 56,000
5. Profit before tax (3 - 4 ) / (A – B) (1,01,500 – 56,000) 45,500
6. Tax during the year NIL
7. Profit after tax (5 – 6) (45,500 – 0) 45,500
Profit attributable to:
1. Owners of the parent (B/F) NIL
2. Non – Controlling interest NIL
TOTAL 45,500

OTHER EXPENSES
Printing and stationery 2,000
Advertisement 4,000
Goodwill written off 1,500
Discount allowed 1,000
TOTAL 8,500
6. Sri Rama Ltd acquired 60% of Equity shares in Laxman Ltd, on 01.10.2016. The following
balances are extracted from the balance sheet of Laxman, ltd as on 31.03.2017.
i. Share capital: 40,000 equity shares of Rs.100 each fully paid.
ii. General Reserve on 01.04.2016 Rs. 80,000
iii. Profit and Loss account (Credit) on 1.4.2016 Rs. 30,000
iv. Net profit for the year ended 31.03.2017 Rs. 60,000
Calculate cost of control.

CALCULATION OF COST OF CONTROL

PARTICULARS AMOUNT AMOUNT
Purchase price of Share capital (40,000 x 60%) (24,000 x 100) 24,00,000
LESS: Share capital (40,000 x 60%) (24,000 x 100) 24,00,000
General Reserve (80,000 x 60%) 48,000
Profit and Loss account (30,000 x 60%) 18,000
Net Profit (60,000 x 60% x ½) 18,000 24,84,000
COST OF CONTROL 84,000
NOTE: ½ is considered for net profit in cost of control

SECTION – C (14 MARKS)

7. a. Explain in brief, any two international financial reporting standards.

IFRS 1 First-time Adoption of International Financial Reporting Standards
IFRS 1 requires an entity that is adopting IFRS Standards for the first time to prepare a
complete set of financial statements covering its first IFRS reporting period and the preceding year.
The entity uses the same accounting policies throughout all periods presented in its first IFRS
financial statements. Those accounting policies must comply with each Standard effective at the end
of its first IFRS reporting period.

IFRS 2 Share-based Payment

IFRS 2 specifies the financial reporting by an entity when it undertakes a share-based payment
transaction, including issue of share options.

It requires an entity to recognize share-based payment transactions in its financial statements,

including transactions with employees or other parties to be settled in cash, other assets or equity
instruments of the entity.

IFRS 3 Business Combinations

IFRS 3 establishes principles and requirements for how an acquirer in a business combination:
  Recognizes and measures in its financial statements the assets and liabilities acquired, and
any interest in the acquire held by other parties;
 Recognizes and measures the goodwill acquired in the business combination or a gain from a
bargain purchase; and
 determines what information to disclose to enable users of the financial statements to evaluate
the nature and financial effects of the business combination.

IFRS 4 Insurance Contracts

IFRS 4 specifies some aspects of the financial reporting for insurance contracts by any entity
that issues such contracts and has not yet applied IFRS 17.

An insurance contract is a contract under which one party (the insurer) accepts significant
insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if
a specified uncertain future event (the insured event) adversely affects the policyholder.

IFRS 5 Non-current Assets Held for Sale and Discontinued Operations

 a non-current asset or disposal group to be classified as held for sale if its carrying amount
will be recovered principally through a sale transaction instead of through continuing use;
 assets held for sale to be measured at the lower of the carrying amount and fair value less
costs to sell;
 depreciation of an asset to cease when it is held for sale;
mprise a st ate ment of fi nanci al positi on, a stat em ent of p rofit or los s an d ot her com pre hensiv e inco me, a st ate ment of c hang es in equit y an d a s tate men t of c ash fl ows.

IA 7. b. Discuss the various merits of IFRS.

 To develop a unified set of accounting and reporting standards
 To build a single global financial reporting language
 An accounting framework with global acceptance
 High quality, transparent, understandable, globally enforceable
 More cross border transactions
 Access to international capital and investments
 Enhance confidence of global stakeholders
 Facilitate international acquisitions and mergers
 Peer to Peer Comparison
 It allows for greater comparability
 It is beneficial to new and small investors
 It creates more flexibility
 IFRS save cost
 Unifies business transaction
 Provides consistency
 Better capital market
 Improves internal communication
  Merger and takeover activity
 Investments
 Increasing the level of confidence
 Risk evaluation

Improved financial reporting and tax planning:

Under IFRS, companies will produce a standardized and consistent set of accounting and
financial reports for complying with local statutory and consolidated requirements. This will help
improve the analysis of financial reporting and tax planning processes.

Improved day-to-day operations:

Businesses will get faster access to more in-depth financial performance information to use
in analyzing and making better decisions about day-to-day operations.

Better managed resources:

By standardizing processes and accounting, companies will be able to standardize and
streamline accounting systems across the enterprise and reduce the cost of auditing and statutory
reporting.

Improved financial controls:

By standardizing the approach and control over statutory reporting, businesses will reduce
the risk of penalties and compliance problems enterprise-wide and in individual countries.

Lowered cost of capital:

Increased insight into financial results and adherence to high-quality financial standards, as
specified by IFRS, can benefit both companies and their investors with reduced cost of capital.

8. a. Evaluate the requirements and disclosure of EPS under Ind AS 33.

Earnings per share is a method used to review the performance of an entity. As the term itself
denotes it simply means determining the profit attributable to each share.
Such information is required to understand the return on investment for the shareholders and
prospective investors.

 An entity shall calculate basic earnings per share attributable to ordinary equity holders of the
entity and, if presented, profit or loss from continuing operations attributable to those equity
holders.
 Basic earnings per share shall be calculated by dividing profit or loss attributable to ordinary
equity holders of the entity (numerator) by the weighted average number of ordinary shares
outstanding (denominator) during the period.

DISCLOSURE
If EPS is presented, the following disclosures are required :

 The amounts used as the numerators in calculating basic and diluted earnings per share, and
a reconciliation of those amounts to profit or loss attributable to the entity for the period.
  The weighted average number of ordinary shares used as the denominator in calculating basic
and diluted earnings per share, and a reconciliation of these denominators to each other.
 Instruments (including contingently issuable shares) that could potentially dilute basic
earnings per share in the future, but were not included in the calculation of diluted earnings
per share because they are antidilutive for the period(s) presented.
 A description of those ordinary share transactions or potential ordinary share transactions,
that occur after the reporting period and that would have changed significantly the number of
ordinary shares or potential ordinary shares outstanding at the end of the period if those
transactions had occurred before the end of the reporting period.

EXAMPLE INCLUDE :

 An issue of shares for cash

 Redemption of ordinary shares outstanding
 Issue of options, warrants, or convertible instruments.

8. b. What are the objectives, scope and disclosure of related party as per Ind AS 24.
OBJECTIVE
The objective of this Standard is to ensure that an entity’s financial statements contain the
disclosures necessary to draw attention to the possibility that its financial position and profit or loss
may have been affected by the existence of related parties and by transactions and outstanding
balances, including commitments, with such parties.
The objective of IAS 24 is to ensure that an entity’s financial statements contain the
disclosures necessary to draw attention to the possibility that its financial position and profit or loss
may have been affected by the existence of related parties and by transactions and outstanding
balances, including commitments, with such parties.

A related party is a person or an entity that is related to the reporting entity:

A person or a close member of that person’s family is related to a reporting entity if that
person has control, joint control, or significant influence over the entity or is a member of its
key management personnel.
 An entity is related to a reporting entity if, among other circumstances, it is a parent,
subsidiary, fellow subsidiary, associate, or joint venture of the reporting entity, or it is
controlled, jointly controlled, or significantly influenced or managed by a person who is a
related party.
SCOPE
This Standard shall be applied in:
(a) Identifying related party relationships and transactions;
(b) Identifying outstanding balances, including commitments, between an entity and its
related parties;
 (c) Identifying the circumstances in which disclosure of the items in (a) and (b) is required;
and (d) determining the disclosures to be made about those items.
DISCLOSURES
Relationships between parents and subsidiaries. Regardless of whether there have been
transactions between a parent and a subsidiary, an entity must disclose the name of its parent and,
if different, the ultimate controlling party.
If neither the entity's parent nor the ultimate controlling party produces financial statements
available for public use, the name of the next most senior parent that does so must also be disclosed.
This Standard requires disclosure of related party relationships, transactions and outstanding
balances, including commitments, in the consolidated and separate financial statements of a parent,
venturer or investor presented in accordance with Indian Accounting Standard (Ind AS) 27
Consolidated and Separate Financial Statements.
This Standard also applies to individual financial statements.
Related party disclosure requirements as laid down in this Standard do not apply in
circumstances where providing such disclosures would conflict with the reporting entity’s duties of
confidentiality as specifically required in terms of a statute or by any regulator or similar competent
authority.
A related party relationship could have an effect on the profit or loss and financial position of
an entity.
Related parties may enter into transactions that unrelated parties would not.
For example, an entity that sells goods to its parent at cost might not sell on those terms to
another customer. Also, transactions between related parties may not be made at the same amounts
as between unrelated parties.

9. a. Calculate the borrowing cost in the case of Indraprastha co. Ltd.

i. 30 crores arranged by 12% p.a. Debentures payable after 10 years, 10 crores by 12 years’
loan from SBI and 10 crores form Indian Bank. The SBI interest rate 14% p.a. and Indian
Bank interest rate is 16% p.a.
ii. Debentures repayable at 10% premium.
iii. The cost of issue of debentures is Rs.22 lakhs.
iv. The service charges for SBI loan 8%.

CALCULATION OF BORROWING COST

SL.NO PARTICULARS AMOUNT

1 Interest on Debentures (30,00,00,000 x 12%) 3,60,00,000
2 Interest on SBI (10,00,00,000 x 14%) 1,40,00,000
3 Interest on Indian Bank (10,00,00,000 x 16%) 1,60,00,000
4 Premium on Debentures (30,00,00,000 x 10% / 10 years) 30,00,000
 5 Cost of issue of Debentures (22,00,000 / 10 years) 2,20,000
6 Service Charges for SBI loan (10,00,00,000 x 8% / 12 years) 6,66,666
TOTAL BORROWING COST 6,98,86,666

9. b. The cost of a machine is Rs.3,00,000, which has 5 years of useful life. Depreciation is on
straight line method at 10% p.a. Machine is expected to generate Rs.30,000 p.a. net cash flow
for 5 years.
The net realizable value of the machine on current date is Rs. 1,40,000.
The required rate of return is 10% p.a.
i. Carrying amount of the machine.
ii. Impairment loss
iii. Revised carrying amount.
(The present value of an annuity at 10% p.a for 5 year is 3.79)

CALCULATION OF CARRYING AMOUNT OF THE MACHINE

PARTICULARS AMOUNT
Cost of machinery 3,00,000
LESS: Depreciation (3,00,000 x 10%) = (30,000 x 5 years) 1,50,000
CARRYING AMOUNT 1,50,000
Value in use 30,000 x 3.79 = 1,13,700

CALCULATION OF IMPAIRMENT LOSS

PARTICULARS AMOUNT
Value in use 1,50,000
Less: Net realizable value of the machine 1,40,000
IMPAIRMENT LOSS 10,000

CALCULATION OF REVISED CARRYING AMOUNT

PARTICULARS AMOUNT
Carrying Amount 1,50,000
Less: Impairment Loss 10,000
IMPAIRMENT LOSS 1,40,000

10. a. Prepare a statement of Profit and Loss account of Mr. Sachidanand company limited as
on 31st March 2019.
PARTICULARS AMOUNT
Goods acquired 6,00,000
Stock of goods on 1-1-2016 80,000
Stock of goods on 31-12-2016 90,000
Sales 10,00,000
Depreciation on fixed assets 10,000
 Preliminary expenses written off 8,000
Salaries to the employees 19,000
Rent of showroom 12,000
Interest on loan 10,000
Discount received from suppliers 5,000
Office expenses 2,000
Printing and stationaries 1,800
Carriage outwards 1,200
Advertisement 800
Income tax at 40%

STATEMENT OF PROFIT AND LOSS ACCOUNT OF Mr. Sachidanand company

as on 31st March 2019
PARTCULARS AMOUNT AMOUNT
1. Revenue from operations (Sales) 10,00,000
2. ADD: Other incomes (Discount received from suppliers) 5,000
3. TOTAL REVENUE (A) 10,05,000
4. EXPENSES
a. Cost of Materials consumed 6,00,000
b. Purchase of stock in trade NIL
c. Changes in inventories (Stock of goods on 1-1-2016 - (10,000)
Stock of goods on 31-12-2016) (80,000 – 90,000)
d. Employee benefits - Salaries to the employees 19,000
e. Finance cost NIL
f. Depreciation on fixed assets 10,000
g. Other Expenses 35,800
TOTAL EXPENSES (B) 6,54,800
5. Profit before tax (3 - 4 ) / (A – B) (10,05,000 – 6,54,800) 3,50,200
6. Tax during the year (3,50,200 x 40%) 1,40,080
7. Profit after tax (5 – 6) (3,50,200 – 1,40,080) 2,10,120
Profit attributable to:
1. Owners of the parent (B/F) NIL
2. Non – Controlling interest NIL
TOTAL 2,10,120

OTHER EXPENSES
Preliminary expenses written off 8,000
Rent of showroom 12,000
Interest on loan 10,000
Office expenses 2,000
Printing and stationaries 1,800
Carriage outwards 1,200
Advertisement 800
TOTAL 35,800
10. b. The Trail balance of Mysore ltd, on 31.03.2017 was given as under.
PARTICULARS Dr. Cr.
Share capital: Share of Rs.100 each - 4,00,000
8% mortgage debentures - 1,00,000
Plant and Machinery 4,50,000 -
Furniture 50,000 -
Land and Building 1,00,000 -
Accounts Payable - 1,20,000
Long term loans - 2,00,000
Provisions for depreciation - 50,000
Inventories 1,80,000 -
Accounts receivable 20,000 -
Investments in flats 1,60,000 -
Technical know – how 40,000 -
Cash and cash equivalents 20,000 -
P/L A/c - 1,30,000
Revenue received in advance - 20,000
TOTAL 10,20,000 10,20,000

Prepare a statement of financial positon of Mysore Ltd, as on 31.03.2017 as per

schedule III of companies act 2013.
STATEMENT OF FINANCIAL ANALYSIS OF Mr. MNC LIMITED AS ON 31st MARCH 2019

PARTICULARS AMOUNT AMOUNT

EQUITY AND LIABILITIES
Share capital 4,00,000
8% mortgage debentures 1,00,000
Account payable 1,20,000
Long term loans 2,00,000
Provision for depreciation 50,000
Profit and loss account 1,30,000
Revenue receded in advance 20,000
TOTAL LIABILITIES 10,20,000
ASSETS
Plant and machinery 4,50,000
Furniture 50,000
Land and building 1,00,000
Inventories 1,80,000
Accounts receivable 20,000
Investment in flats 1,60,000
Technical know how 40,000
Cash and cash equivalents 20,000
TOTAL ASSETS 10,20,000
_______________________________________________________________________________
11. a. The statements of financial of Keerthi Ltd, and Murthy Ltd, as on 31.03.2017.
PARTICULARS Keerthi Ltd Murthy Ltd
LIABILITIES:
Share capital: Shares of Rs.10 each, 4,00,000 1,00,000
General Reserve on 1.4.2016 1,00,000 40,000
P/L A/c on 1.4.2016 60,000 15,000
Profit for 2016 – 2107 2,40,000 2,00,000
Accounts Payable 40,000 20,000
TOTAL 8,40,000 3,75,000
ASSETS
Tangible fixed assets 3,90,000 1,40,000
Investments: (8,000 shares of Rs.20 each in Murthy Ltd) 1,60,000 -
Accounts receivables 2,40,000 1,60,000
Other current assets 50,000 75,000
TOTAL 8,40,000 3,75,000
Keerthi Ltd. Acquired the shares in Murthy Ltd, on 01.08.2016.
Calculate Non – Controlling interest.

STEP 1 : CALCULATION OF RATIO

PARTICULARS AMOUNT

Number of Shares in Selling Company (‘Murthy’ Limited) (1,00,000 / 10,000

10) (Table value)
Number of Shares in Purchasing / Investments 8,000
Minority Shareholders (Selling company – Acquiring company) 2,000
(10,000 – 8,000)
Ratio = (Acquiring company ratio: Minority shares)
(8,000 : 2,000) (8 : 2) (4 : 1) (2 x 4 = 8) (2 x 1 = 2)

STEP 2 : CACLUATION OF CAPITAL PROFITS

AMOUNT AMOUNT
PARTICULARS
1. Profit and Loss account as on 01 - 04 – 2016 (Selling company, 15,000
Table value)
2. Reserves as on 01 -04 – 2016 (Selling company, Table value) 40,000
3. Profits during the year (2,00,000 x 4 months / 12 months) 66,666
(1.4.2016 – 1.8.2016)
TOTAL SHARES OF CAPITAL PROFITS 1,21,666
Capital Profit = Capital Profit Amount X Minority shares ratio) 24,333
(1,21,666 x 1/5)

STEP 3 : CACLUATION OF REVENUE PROFITS

AMOUNT AMOUNT
PARTICULARS
SHARES OF REVENUE PROFITS
 1. Profits during the year (2,00,000 x 8 months / 12 months) 1,33,333
(1.8.2016 – 31.3.2017)
TOTAL SHARES OF REVENUE PROFIT
Revenue Profit = Revenue Profit Amount X Minority shares ratio) 26,666
(1,33,333 x 1/5)

STEP 4 : CACLUATION OF NON CONTROLLING INTEREST

AMOUNT AMOUNT
PARTICULARS
Share capital / Minority Shareholders (2,000 x 10) 20,000
Capital Profit = Minority shares ratio 24,333
Revenue Profit = Minority shares ratio 26,666 50,999
NON CONTROLLING INTEREST (NCI) 71,000

11. b. Friends company ltd. Acquired 6000 shares in Enemies company Ltd on 1.1.2016. The
summarized financial position of the above two companies as on 31.3.2017 was as under.
LIABILITIES Friends Ltd Enemies Ltd
Share capital: Shares of Rs.100 each fully paid up 4,00,000 2,00,000
Reserves on 1.4.2016 20,000 30,000
P/L Accounting 1,00,000 80,000
Current Liabilities 70,000 60,000
Total Liabilities 5,90,000 3,70,000
ASSETS
Investment in real estate 50,000 80,000
Investment in shares of Enemies Ltd 2,00,000 -
Machinery 1,50,000 90,000
Current Assets 22,000 20,000
Building 1,68,000 1,80,000 -
Total Assets 5,90,000 3,70,000
P/L Account balance of Enemies company Ltd on 1.4.2016 was Rs.30,000
Compute the non - controlling interest and Goodwill or Capital Reserve.

STEP 1 : CALCULATION OF RATIO

PARTICULARS AMOUNT
Number of Shares in Selling Company (Enemies Limited) (2,00,000 / 100) 2,000
Number of Shares in Purchasing / Acquiring Company (Friends Limited) 6,000
Minority Shareholders (6,000 – 2,000) 4,000

Ratio = (Acquiring company ratio: Minority Shares) (6,000 : 4,000) (3 : 2)

STEP 2 : CACLUATION OF CAPITAL PROFITS

PARTICULARS AMOUNT AMOUNT
1. Profit and Loss account 80,000
2. Reserves 30,000
 3. Profits during the year (30,000 x 3 months / 12) (1.1.2016 – 7,500
1.04.2016)
TOTAL SHARES OF CAPITAL PROFITS 1,17,500
Capital Profit = Capital Profit Amount X Minority shares ratio) 47,000
(1,17,500 x 2/5)

STEP 3 : CACLUATION OF REVENUE PROFITS

PARTICULARS AMOUNT AMOUNT

1. Profits during the year (30,000 x 12 months / 12) (1.4.2016 – 30,000

31.03.2017)
TOTAL SHARES OF REVENUE PROFIT
Revenue Profit = Revenue Profit Amount X Minority shares ratio) 12,000
(30,000 x 2/5)

STEP 4 : CACLUATION OF NON CONTROLLING INTEREST

PARTICULARS AMOUNT AMOUNT
Share capital / Minority Shareholders (4,000 x 100) 4,00,000
Capital Profit = Minority shares ratio 47,000
Revenue Profit = Minority shares ratio 12,000 59,000
NON CONTROLLING INTEREST (NCI) 4,59,000

GOOD WILL CALCULATION / CAPITAL RESERVE

PARTICULARS AMOUNT AMOUNT
Share Capital of purchasing company (Selling company, Table 2,00,000
value)
LESS: 1. Face value of share (6,000 x 100) (Adjustment value) 6,00,000
2. Capital Profits (1,17,500 x 3/5) (Ratio of purchasing company) 70,500 6,70,500
GOODWILL / CAPITAL RESERVE 4,70,500