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Important Stuff on Ind AS 103, Business Combinations

Indian Accounting Standard (Ind AS) 103, Business Combinations, Important Material

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IND AS 103: Business Combination

A business combination is a transaction or other event in which an acquirer obtains CONTROL of one or more BUSINESS.

Generally, companies doing similar type of business or involved in similar line of activities may be combined to get the economies of scale and to minimize the possibility of tough competition. Business combination results in growth. Business combination can be in the form of merger and acquisition.

A ‘merger’ refers to a situation where two or more than two companies of similar nature combine willingly while in case of ‘acquisition’ or ‘take over’ refers to the situation where a bigger company takes over a smaller company. It can be either through amalgamation or through absorption.

AS-14 ‘Amalgamations’ and Ind AS-103 ‘Business Combination’ is substantially different. Ind AS-103 lays down the accounting principles for business combination and not for asset combination.


To improve the relevance, reliability and comparability of the information that a reporting entity provides in its financial statements about a business combination and its effects.

To accomplish that, this Ind AS establishes principles and requirements for how the acquirer:
(a) recognises and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree;
(b) recognises and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and
(c) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination.


This Ind AS applies to a transaction or other event that meets the definition of a business combination.

(a) the accounting for the formation of a joint arrangement in the financial statements of the joint arrangement itself.
(b) the acquisition of an asset or a group of assets that does not constitute a business. In such cases the acquirer shall identify and recognise the individual identifiable assets acquired (including Ind AS 38, Intangible Assets) and liabilities assumed. The cost of the group shall be allocated to the individual identifiable assets and liabilities on the basis of their relative fair values at the date of purchase. Such a transaction or event does not give rise to goodwill.

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