Mystery in Amalgamation

This query is : Resolved

SWAPNIL MEERA SHARMA (Querist)
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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)
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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)
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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)
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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)
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18 August 2010 Okay sir.... I got it now.
Thanks.

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