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Amalgamation

This document discusses the accounting treatments for amalgamation in the nature of a purchase under a new company according to AS-14. It defines amalgamation in the nature of a purchase as not meeting the criteria for an amalgamation in the nature of a merger. The net assets method and consideration method for calculating the purchase consideration are described. The key steps for the net assets method include calculating the assets and liabilities taken over at book or revised value, and comparing this to the purchase consideration to determine goodwill or capital reserve. Important issues like valuation of assets/liabilities and accounting for debentures or unrecorded liabilities are also covered.

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Nirav Jadav
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93 views

Amalgamation

This document discusses the accounting treatments for amalgamation in the nature of a purchase under a new company according to AS-14. It defines amalgamation in the nature of a purchase as not meeting the criteria for an amalgamation in the nature of a merger. The net assets method and consideration method for calculating the purchase consideration are described. The key steps for the net assets method include calculating the assets and liabilities taken over at book or revised value, and comparing this to the purchase consideration to determine goodwill or capital reserve. Important issues like valuation of assets/liabilities and accounting for debentures or unrecorded liabilities are also covered.

Uploaded by

Nirav Jadav
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPT, PDF, TXT or read online on Scribd
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ACCOUNTING TREATMENTS IN THE BOOKS OF NEW COMPANY IN CASE OF AMALGAMATION IN THE NATURE OF PURCHASE(ABOUT NETASSEST)

TYPES OF AMALGAMATION AS PER AS-14 : As

Per standard AS-14 amalgamation is categorical classified into two groups. Amalgamation in the Nature of Merger. Amalgamation in the Nature of Purchase.

1) 2)

AMALGAMATION IN THE NATURE OF PURCHASE :o If the Amalgamation is not in the Nature of Merger so this is in the Nature of Purchase.5 CONDITIONS 1) It is not required to Transfer all the assets and liabilities of the transferor (vendor/old company) in the same form in the transferee (New Company) 2) It is not required that share holders holding 90% of shares in the transferor company to be a share holders of the transferee company 3) It is not required that the share holders of the transferor company who agrees to the scheme are paid only equity shares of transferee company as

Contd.
Consideration. They can be paid the Consideration in the form of Preference shares , debentures of the new company and even cash also. 4) It is not required that the business of the transferor company be intended to be continued by the transferee company after the amalgamation. 5) The book value of assets and liabilities of the transferor company can be changed if required while incorporating in the financial statements of the transferee company.

PURCHASE CONSIDERATION
There

:-

are two different Methods.

1) Net Assets Method 2) Consideration Method

PURCHASE METHOD :If Consideration > Net Asset Value GOODWILL

Consideration < Net Asset Value

CAPITAL RESERVE

NET ASSETS METHOD :Important points for calculating Net Assets 1) Realizable value of assets: if the Market value or revaluation price of various assets is not given then , the book value will be considered. 2) The amount of goodwill if there is realizable value then considered. Here difference of opinion is there. 3) Fictitious assets and intangible assets are excluded. 4) All recorded liabilities as well as unrecorded liabilities which are likely to be paid will be considered.

CONTD.
5) For calculation of Inter-company-transactions will not be considered.

NET ASSETS METHOD :How To Calculate: Assets Taken over ------------------------------------------------------------------------------------

*** *** *** ###

(-) Less: Liabilities Taken over -------------------------------------------------------------------------------------

*** *** *** ### Purchase Consideration ### Note: Assets and Liabilities will be taken over at revised figure if given otherwise at Book Value

SOME IMPORTANT ISSUES:1) 2) 3) 4) 5) 6) 7) Value of Assets & Liabilities taken over Issue of Debentures Intangible & fictitious Assets List of Liabilities Retained earnings Any Unrecorded Liability Accepted Specific Instruction.

BALANCE SHEET:Liabilities
Share Capital: Reserve & Surplus: Secured Loan: Unsecured Loan: Current Liabilities & Provision: i)CurrentLiabilities ii)Provisions

Amt.

Assets
Fixed Assets: Investments: Current Asset: Loans & Advances: Misc. Expenses.(Not w/off)

Amt.

THANK YOU.

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