ACCOUNTING STANDARD - 14

ACCOUNTING FOR AMALGAMATIONS

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PURPOSE

Accounting for amalgamations,

Treatment of any resultant goodwill or reserves.

It does not deal with acquisition by one company of another company in consideration for payment in cash or by issue of shares.
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TYPES OF AMALGAMATIONS

NATURE OF MERGER NATURE OF PURCHASE

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CONDITIONS FOR NATURE OF MERGER

All the assets and liabilities are transferred;
Shareholders holding not less than 90% of the face value of the equity shares of the transferor company become shareholders of transferee company; The consideration is discharged by the issue of equity shares in the transferee company;

The business of the Transferor Company is intended to carried on; &

No adjustment to be made to the book values of the assets and liabilities.

be

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METHODS FOLLOWED

NATURE OF MERGER -- Pooling of Interests method

NATURE OF PURCHASE -- Purchase method

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POOLING OF INTERESTS METHOD

The assets, liabilities and reserves are recorded at their existing carrying amounts.
Uniform set of accounting policies is adopted. The difference between the share capital issued and the share capital of the transferor company should be adjusted in reserves.

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PURCHASE METHOD
The assets & liabilities are recorded either at existing carrying values or by allocating the consideration on the basis of Fair values on the date of amalgamation. The reserves of the transferor company, other than the statutory reserves, should not be included in the financial statements of the transferee company.
Contd.. MADHURA TILAK

PURCHASE METHOD
CONSIDERATION

Securities Cash Other assets

In determining the value of the consideration, an assessment is made of the fair value of its elements.
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PURCHASE METHOD
If
Consideration > Net Asset value
Consideration < Net Asset value

GOODWILL
CAPITAL RESERVE

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DISCLOSURES
FIRST YEAR - BOTH NATURES OF AMALGAMATION names and general nature of business of the amalgamating companies;

effective date of amalgamation for accounting purposes;

the method of accounting used to reflect the amalgamation; and particulars of the scheme sanctioned under a statute.
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DISCLOSURES
FROM SECOND YEAR
Pooling of Interests method (a) description and number of shares issued, (b) the amount of any difference between the consideration and the value of net assets acquired Purchase method

(a) (b)

a description of the consideration paid or payable; any difference between the consideration and the value of net assets acquired. MADHURA TILAK