Mystery in Amalgamation

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This query is : Resolved

SWAPNIL MEERA SHARMA (Querist)

15 August 2010 Sir/Madam,

Why we consider "Liquidation Expenses" paid by transferee company as GOODWILL in its account and not a preliminary expense...???

We pass this entry in its(Purchaser) book:-
Goodwill A/c......Dr.
To Bank A/c

Now I wanna know what's logic behind it works....???

or why we don't include such expenses paid in Purchase consideration....???

CA Punit

CA Punit (Expert)

16 August 2010 Liquidation expenses is not obligation (expense) of transferee co. but of the transferor co.
The same being met by transferee co. is also one type of consideration paid.
& Hence they r debited to goodwill or capital reserve

Message likes : 1 times

SWAPNIL MEERA SHARMA

SWAPNIL MEERA SHARMA (Querist)

17 August 2010 Yup right sir but then my doubt arises for the thing that why don't we include such payment into ACTUAL PURCHASE CONSIDERATION.

Is it a flaw...???

CA Punit

CA Punit (Expert)

17 August 2010 'Actual purchase consideration', as the title itself indicates, is an amount for the net assets acquired.
i.e. consideration for the "purchase".

Any other payment if made is also a consideration but factually not towards such purchase.

At last...the difference (if any) between the net assets acquired & TOTAL consideration is reflected as goodwill/cap reserve.
There's nothing wrong in the treatment & no flaw...

SWAPNIL MEERA SHARMA

SWAPNIL MEERA SHARMA (Querist)

18 August 2010 Okay sir.... I got it now.
Thanks.

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