In today鈥檚 evolving corporate environment - particularly within start-ups and private equity-backed companies, it is increasingly common to find individuals such as co-founders and Key Managerial Personnel (KMPs) holding dual roles as both employees and shareholders. If employees or other parties who are also shareholders participate in a transaction with the entity, then it may be difficult to determine in which capacity they act: as suppliers of goods or services to the entity, or as shareholders of the entity. These individuals often enter into various agreements, such as a shareholders鈥� agreement that outlines their rights and responsibilities as owners, and/or an employment agreement that defines their compensation and service terms. Although these agreements are legally distinct, they are frequently interrelated, introducing significant challenges in determining the appropriate accounting treatment under the applicable financial reporting framework. This edition of the Accounting and Auditing Update (AAU) features an article that discusses the key accounting considerations for such arrangements with employees and shareholders, illustrated through case studies.
Ind AS 103, Business Combinations, requires entities to recognise, and measure acquired assets and liabilities at their fair value through a Purchase Price Allocation (PPA) method for all business combinations (other than common control business combinations). PPA is essential in determining how the purchase consideration is allocated among the acquired assets and liabilities. This publication features an article which provides insights on how acquirers allocate the purchase price in their business combinations, particularly with respect to goodwill, property, plant and equipment and intangible assets based on disclosures made by the top 200 listed companies (by market capitalisation) across sectors.聽
As is the case each month, we have also included a regular round-up of some recent regulatory updates in India and internationally. We would be delighted to receive feedback/suggestions from you on the topics we should cover in the forthcoming editions of AAU.
For more information on this update, please write to aaupdate@kpmg.com.
