Acquisition

Key Highlights

• In business, acquisition is used to describe the purchase of one company by another.

• In finance, it is the process of buying a company or part of a company with cash or shares.

• Indexed cost of acquisition (ICA) = (Index for the sale year/Index for the acquisition year) X Cost

What is Acquisition?

In business, the term "acquisition" is used to describe the purchase of one company by another. In finance, acquisition is the process of buying a company or part of a company with cash or shares. When a company acquires another, it usually does so in order to expand its operations and grow its business.

What is Indexed Cost of Acquisition?

The indexed cost of acquisition is the amount it costs to acquire a new business, property or customer relative to the size of your base.

How to Calculate Indexed Cost of Acquisition?

Indexed cost of acquisition can be calculated using the formula:

ICA= (Index for the sale year/Index for the acquisition year) X Cost

For example, if an asset is purchased in 1999-2000 for Rs 10 lakh and got sold in 2011 -12 for Rs 50 lakh, ICA = (758/389) x 10 = Rs 19.48 lakh.