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June 2022

AUDITORS’ RESPONSIBILITY WHEN APPOINTED DATE IS NOT AS PER IND AS STANDARDS

By Dolphy D’souza
Chartered Accountant
Reading Time 9 mins
INTRODUCTION

Numerous merger schemes between common control entities include an appointed date from which the merger is to be accounted. Strictly speaking the ‘appointed date’ mentioned in the scheme may not be in compliance with the ‘acquisition date’ as per Ind AS 103, Business Combinations. In such a case, what is the role of the auditor in the audit report to the financial statements and the audit certificate, which accompanies the scheme filed by the Company with the Court?

ISSUE

Parent entity has two Subsidiaries, namely B and C, which have been subsidiaries for several years. C merges with B. The appointed date specified in the scheme is 1st April, 2021. The Court approved the scheme in March 2022. The Company intends to account for the merger scheme in accordance with ITFG Bulletin 9, Issue 2 from the appointed date. The Company will not restate the comparative numbers. In such circumstances, how should the auditor report the matter in the auditor’s certificate and the audit report?

RESPONSE

Definitions

Common control business combination (Ind AS 103 Appendix C, Business Combinations of Entities under Common Control)
 
Common control business combination means a business combination involving entities or businesses in which all the combining entities or businesses are ultimately controlled by the same party or parties both
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