Understanding the implications of Ind AS 103 is important since they not only affect the balance sheet of a company but may also have tax implications. Post COVID-19, the number of Mergers & Acquisitions increased during the year ended 31 March 2022, particularly in the backdrop of declined M&A activity during the previous year which was impacted due to the pandemic. Ind AS 103 impacts the way companies plan and execute their acquisition strategies. The standards apply to most business combinations, including amalgamations and acquisitions. The change in accounting for business combinations calls for assets/ liabilities (including intangible assets and contingent liabilities which did not exist on the balance sheet of target entities/ businesses) acquired in a deal to be measured at fair value by applying appropriate valuation methods and residual value allocated to goodwill/ capital reserve.
EY’s valuation, modelling and economics services department conducted a Purchase Price Allocation (PPA) study of business combination accounting for transactions that were disclosed in annual reports of top 500+ listed companies in India (covering over 500+ transactions) by market capitalization since implementation of Ind AS till 31 March 2022. The PPA study presents the results of assets (primarily intangible assets) that are typically recognized and reported by a company during an acquisition. However, the results of this study cannot be viewed in isolation.