Common control explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Moving a business from one group company to another does not change who controls it, so Ind AS does not treat it as a purchase. Appendix C of Ind AS 103 tells the receiving company to carry the transferred assets and liabilities at their existing book values, preserve the reserves, restate the comparative period, and take any difference between share capital issued and share capital of the transferor to a capital reserve. This guide explains the rules and works a merger of two subsidiaries.
A combination is under common control if all combining entities are ultimately controlled by the same party both before and after, and that control is not transitory (Appendix C, paragraph 2). The pooling of interests method is mandatory: carrying amounts, no fair value adjustments, no new goodwill, comparatives restated (paragraphs 8 and 9). Reserves keep their identity, and the difference between the share capital issued plus other consideration and the transferor's share capital goes to capital reserve (paragraph 12).
Ind AS as on 1 April 2025 (ICAI Compendium of Ind AS 2025-26, the standards notified under the Companies (Indian Accounting Standards) Rules, 2015). Amendments notified after 1 April 2025 are not reflected in this article and should be checked on mca.gov.in. Group restructurings of this kind need accounting, legal and diligence input together, as in our financial and legal due diligence work.
What Appendix C requires
| Paragraph | Requirement | What it means in practice |
|---|---|---|
| 2-3 | Common control: all combining entities or businesses ultimately controlled by the same party or parties before and after, and that control is not transitory; includes transfer of subsidiaries or businesses within a group | The ultimate controller need not be an Ind AS reporting entity (paragraph 6) |
| 4-7 | The size of non-controlling interests is irrelevant; a subsidiary excluded from consolidation still counts; a group of individuals acting under a contract can be the controller | A partially owned subsidiary is still under the parent's control |
| 8 | Pooling of interests method | Not the acquisition method of the main standard |
| 9 | Carrying amounts; no fair value adjustments or new assets or liabilities, except to harmonise policies; prior periods restated as if combined from the beginning of the preceding period, or from the date common control began if later | Comparatives only, not a third balance sheet (see below) |
| 10 | Securities issued are recorded at nominal value; non-cash consideration at fair value | |
| 11-12 | Retained earnings aggregated or moved to general reserve; reserves keep their identity; the share capital difference goes to a separately presented capital reserve | Distributable reserves stay distributable |
| 13 | Disclose names and nature of business, date of control, shares issued and percentages, and the difference between consideration and net identifiable assets | In the first statements after the combination |
| 14 | A combination after the balance sheet date but before approval is disclosed under Ind AS 10, not incorporated |
IFRS 3 excludes common control combinations from its scope; Appendix C is guidance that exists only in Ind AS, as the standard's comparison with IFRS and ICAI's differences paper both record. The main standard is outlined in Ind AS 103 Business Combinations, and the purchase-method accounting for unrelated parties is in our acquisition method guide. The company-law side of a scheme is in Section 232 of the Companies Act, 2013. For companies on AS, mergers follow a different standard; see our AS 14 guide.
The method
- Test for common control: same ultimate controller before and after, and not transitory (paragraph 2).
- Identify the transferor and the transferee (paragraph 2).
- Bring in the assets and liabilities at carrying amounts, aligning accounting policies only (paragraph 9).
- Record shares at nominal value (paragraph 10).
- Aggregate or transfer retained earnings; preserve other reserves in the same form (paragraphs 11 and 12).
- Take the share capital difference to a separate capital reserve (paragraph 12).
- Restate comparatives as if combined from the beginning of the preceding period (paragraph 9(iii)).
- Disclose under paragraph 13.
Worked example
The entity and all figures in this example are invented for illustration. Amounts are in rupees lakh.
Narmada Holdings Limited owns all the shares of Sutlej Components Limited and Beas Fabrication Limited. Under a scheme, Beas merges into Sutlej. Narmada controlled both entities throughout, so this is a common control combination between fellow subsidiaries, and Sutlej is the transferee. Sutlej issues 15,00,000 equity shares of Rs 10 each (Rs 150 lakh at nominal value) to Narmada, the only shareholder of Beas, and no other consideration is paid. The financial year ends on 31 March. The combined position is shown at the end of the preceding period, FY1, the date from which comparatives are restated.
Balance sheets before the merger (carrying amounts).
| Item | Sutlej (Rs lakh) | Beas (Rs lakh) |
|---|---|---|
| Assets | 1,500 | 1,000 |
| Liabilities | 600 | 380 |
| Net assets | 900 | 620 |
| Share capital | 300 | 200 |
| Retained earnings | 450 | 300 |
| General reserve | 150 | 100 |
| Capital reserve | nil | 20 |
| Total equity | 900 | 620 |
Step 1: assets and liabilities (paragraph 9(i) and (ii)). Beas's assets of Rs 1,000 lakh and liabilities of Rs 380 lakh enter Sutlej's books at their carrying amounts, with no fair value adjustment, no goodwill and no new intangible assets.
Step 2: share capital and the difference (paragraphs 10 and 12). Shares issued at nominal value: Rs 150 lakh. Beas's share capital: Rs 200 lakh. The difference is 200 - 150 = Rs 50 lakh. As the transferee issues less share capital than the transferor had, the difference is a credit to a capital reserve shown separately from other capital reserves, with a note on its nature and purpose.
Step 3: reserves (paragraphs 11 and 12). Beas's retained earnings of Rs 300 lakh are added to Sutlej's, and its general reserve of Rs 100 lakh and capital reserve of Rs 20 lakh keep their identity.
| Particulars | Debit (Rs lakh) | Credit (Rs lakh) |
|---|---|---|
| Assets of Beas | 1,000 | |
| To Liabilities of Beas | 380 | |
| To Share capital (15,00,000 shares at Rs 10) | 150 | |
| To Retained earnings | 300 | |
| To General reserve | 100 | |
| To Capital reserve (Beas's own) | 20 | |
| To Capital reserve on common control combination | 50 |
Step 4: the combined balance sheet.
| Item | Sutlej before | Added from Beas | Combined (Rs lakh) |
|---|---|---|---|
| Assets | 1,500 | 1,000 | 2,500 |
| Liabilities | 600 | 380 | 980 |
| Net assets | 900 | 620 | 1,520 |
| Share capital | 300 | 150 | 450 |
| Retained earnings | 450 | 300 | 750 |
| General reserve | 150 | 100 | 250 |
| Capital reserve | nil | 20 | 20 |
| Capital reserve on common control combination | nil | 50 | 50 |
| Total equity | 900 | 620 | 1,520 |
Check. Debits 1,000 = credits 380 + 150 + 300 + 100 + 20 + 50 = 1,000. Combined net assets 2,500 - 980 = 1,520 = combined equity 450 + 750 + 250 + 20 + 50 = 1,520, and also equals the sum of the two entities' equity, 900 + 620. Nothing is created or lost by pooling, which is why the difference of Rs 50 lakh arises: it is the gap between the share capital given and the share capital taken over. If Sutlej had paid Rs 40 lakh in cash as well, the figures would be 150 + 40 = 190 against 200, leaving a capital reserve of Rs 10 lakh.
Step 5: comparatives (paragraph 9(iii)). Sutlej's statements for the current year and the comparative year are presented as if Beas had been part of Sutlej from the beginning of FY1, even if the scheme takes effect later in FY2. If common control began after the start of FY1, the prior period is restated only from that date.
Step 6: group accounts. In the consolidated statements of Narmada, the merger is an intra-group event and its effect is eliminated (ITFG Clarification Bulletin 9, Issue 2); the consolidated numbers do not change.
ITFG views that still read the same
The ITFG views below are the views of ICAI's Ind AS Technical Facilitation Group as on the date of each bulletin; they are not standards. Read against paragraph 9 of Appendix C, they are consistent with the current text. ITFG Clarification Bulletin 9, Issue 2, says that on a merger of fellow subsidiaries the transferee recognises the carrying amounts in the books of the entities being combined, and on a merger of a subsidiary into the parent the carrying amounts as they appeared in the parent's consolidated statements; in both cases the merger is eliminated in the parent's consolidated statements. ITFG Clarification Bulletin 22, Issue 5, says that restating comparatives under paragraph 9(iii) does not require a third balance sheet at the start of the preceding period (unless that date is also the date of transition to Ind AS). ITFG Clarification Bulletin 22, Issue 6, says the restatement runs from the beginning of the comparative period even if the scheme's appointed date is later, and applies only to the transferee. Our digest of ITFG clarifications on business combinations and consolidation covers these and related issues.
Presentation and disclosure
Paragraph 13 requires, in the first financial statements after the combination, the names and general nature of business of the combining entities, the date the transferee obtains control, the shares issued with the percentage of each entity's equity exchanged, and the amount of any difference between consideration and the value of net identifiable assets, with its treatment. A scheme approved by the tribunal may also prescribe its own accounting; the procedural steps are outside this article.
Common mistakes
- Applying the acquisition method and fair-valuing a transfer between group companies.
- Recording the shares issued at fair value instead of nominal value (paragraph 10).
- Mixing the reserves of the transferor into one line and losing their identity (paragraph 12).
- Not restating comparatives, or restating from the scheme's appointed date alone (paragraph 9(iii)).
- Forgetting to eliminate the merger in the parent's consolidated accounts.
- Calling control common when it is transitory (paragraph 2).
Need help with group restructuring accounting?
A merger of group companies involves a court or tribunal process, tax, and accounting that must all line up. Our team can prepare the pooling workings, the comparative restatement and the disclosures alongside the diligence in financial and legal due diligence, so the filed scheme and the financial statements are consistent.
Key takeaways
- Same ultimate controller before and after, not transitory, means common control.
- Pool at carrying amounts: no fair values, no goodwill.
- Shares go in at nominal value; reserves keep their identity.
- The difference between share capital issued and the transferor's share capital goes to a separate capital reserve.
- Restate comparatives as if combined from the beginning of the preceding period.
Read next
- Business combinations under Ind AS 103: acquisition method, goodwill and NCI
- ITFG clarifications on business combinations and consolidation: Ind AS 103, 110, 27 and 28
- Section 232 of the Companies Act, 2013: merger and amalgamation
- AS 14 Accounting for Amalgamations for non-Ind AS companies
Disclaimer: Based on the Indian Accounting Standards as on 1 April 2025 (ICAI Compendium of Ind AS 2025-26, the standards notified under the Companies (Indian Accounting Standards) Rules, 2015) and, where named, the ITFG clarification bulletins of ICAI, as consulted on 4 October 2026. The worked example uses invented figures. Amendments notified after 1 April 2025 should be checked on mca.gov.in. This article is general information, not legal advice; check the official text before acting.