Accounting treatment of Statutory Reserve in AMalgamation

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

04 December 2009 Can any of respectable experts make me clear that while passing journal entry in the books of transferee company -what treatment of STATUTORY RESERVE of transferor company will be done (Amalgamation in nature of merger )

I know that in nature of Purchase -it is done as follows :-
Amalgamation Adjustment a/c Dr.
Statory Reserve a/c Cr.

But in nature of Merger -its little bit confusion.

thanks in advance

CA. Tarun Navlani

CA. Tarun Navlani (Expert)
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04 December 2009 When amalgamation is in the nature of merger, there is no distinction between statutory or other reserves.

Transferee company shall record statutory reserves in the same manner as other reserves i.e. at the time of incorporating assets & liablities of transferor company after business purchase entry, we shall also consider ALL RESERVES & balancing figure will be debited or credited, as the case may be, to Goodwill or Capital Reserve.

Querist : Anonymous

Querist : Anonymous (Querist)

04 December 2009 sorry dear -i m not agree with you -Actually in case of Merger -while making entry in books of Trnsfree company -DIfference of Purchase consideration & Capital will be transferred to GENERAL RESERVE /P & L A/c.

But my asking is still unresolved -as i seen in a book
Sundry Assets Dr
To Sundry Liabilies a/c
To Statutory Reserve a/c (WHY IT IS TAKEN HERE)

Rahul Gupta

Rahul Gupta (Expert)
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05 February 2010 The statutory reserves are of the nature which are required to be made according to some statutory laws.
So whatever it will be, it will be required to be shown seperately in the Transfreee co. since it is mandatory acc. to law.