This edition of the Accounting and Auditing Update (AAU) continues our series on business combinations and focuses on another critical aspect of acquisition accounting, the measurement of purchase consideration under Indian Accounting Standard (Ind AS) 103, Business Combinations. As mergers and acquisitions landscape continues to evolve, deal structures increasingly include complex payment mechanisms and contractual features making the accounting for purchase consideration an area of significant focus. Measurement of purchase consideration directly impacts the amount of goodwill or bargain purchase gain and may impact post-acquisition earnings and disclosures. Accordingly, entities are required to carefully evaluate the substance of the underlying arrangements and apply appropriate judgement in determining the accounting treatment. This chapter discusses key accounting considerations relating to deferred and contingent consideration, pre-existing relationships, employee remuneration arrangements, acquisition-related costs, and share-based payment arrangements.
This edition also examines the accounting implications of service concession arrangements under Appendix D to Ind AS 115, Revenue from Contracts with Customers, which is based on International Financial Reporting Interpretations Committee (IFRIC) 12, Service Concession Arrangements. India’s infrastructure ecosystem moves towards public-private partnership (PPP) models across sectors such as transportation, utilities and social infrastructure. Therefore, determining whether an arrangement falls within the scope of Appendix D has become an increasingly important area of judgement. Additionally, infrastructure projects often involve complex commercial, regulatory and operational features. These features require a robust assessment driven by the substance of rights and obligations. The determination of scope influences the nature of assets and timing and pattern of revenue recognition. This chapter discusses scope assessment principles under Appendix D and illustrates their application through practical case studies.
This edition of the AAU also covers key regulatory developments from India and international regulators. Key updates relate to amendment of concentration risk management framework for Upper Layer - Infrastructure Debt Fund Non-Banking Financial Companies by Reserve Bank of India, alignment of cyber incident reporting portal with Format for Incident Reporting Exchange (FIRE) by Securities and Exchange Board of India and bonus eligibility and computation mechanisms, and increase in wage ceiling for provident fund notified by the Ministry of Labour and Employment. Other updates from International Financial Services Centres Authority, Ministry of Corporate Affairs, Ministry of Finance, Ministry of Consumer Affairs, Food and Public Distribution, and Financial Accounting Standards Board are also covered in this edition.
For more information on this update, please write to aaupdate@kpmg.com.
