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Ind AS 103 Business Combinations
Financial Reporting
In concentration Test, why we don't considered Deferred Tax Liabilities but excludes Deferred Tax Assets for the Gross Assets Computation?
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Best Answer
Thread Starter
Chandu vadlaso why considering the impact of DTA, but not DTL
DTL will also be excluded from Liabilities.
CA Suraj Lakhotia Admin
Concentration test is for Assets acquired. In exclusion we have Deferred Tax Asset. DTL is not considered as it is not an asset.
Sir, but for computation of Fair Value of Gross Assets, we include the Liabilities incurred. And not DTL ? Any reason for that
CA Suraj Lakhotia Admin
Look at the meaning of concentration test. It is to check if business value is concentrated in few assets
Okay sir, then why we include liabilities incurred, if it's just for assets?
Thread Starter
Chandu vadlaOkay sir, then why we include liabilities incurred, if it's just for assets?
Say FV of Assets = 100 FV of Liabilities = 20 So net FV is 80 and we paid 80 to the other company for 100% acquisition. What is the FV of Gross Assets ? It would be 80 + 20 = 100. Now say the FV of a single asset is 95. This means the FV of gross asset is concentrated in a single asset.
CA Suraj Lakhotia Admin
Say FV of Assets = 100 FV of Liabilities = 20 So net FV is 80 and we paid 80 to the other company for 100% acquisition. What is the FV of Gross Assets ? It would be 80 + 20 = 100. Now say the FV of a single asset is 95. This means the FV of gross asset is concentrated in a single asset.
Second scenario Say FV of Assets = 100 FV of Liabilities = 20 So net FV is 80 and we paid 90 to the other company for 100% acquisition. What is the FV of Gross Assets acquired? (From the point of view of what we paid) It would be 90 (amount paid) and 20 (liabilities assumed) = 110. Now say the FV of a single asset is 95. The concentration is 86%. Here judgement is applied whether it has passed concentration test or not.
CA Suraj Lakhotia Admin
Second scenario Say FV of Assets = 100 FV of Liabilities = 20 So net FV is 80 and we paid 90 to the other company for 100% acquisition. What is the FV of Gross Assets acquired? (From the point of view of what we paid) It would be 90 (amount paid) and 20 (liabilities assumed) = 110. Now say the FV of a single asset is 95. The concentration is 86%. Here judgement is applied whether it has passed concentration test or not.
Sir, I had understood the concept, my specific query is described in the excel. Please clarify it
Thread Starter
Chandu vadlaSir, I had understood the concept, my specific query is described in the excel. Please clarify it
so why considering the impact of DTA, but not DTL
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