Slump sale- accounting entries in books of buyer

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Hiren Parikh (Querist)
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13 November 2014 We have purchased a business on going concern basis from our associate company under slump sale. it includes take over of all the assets and liabilities related to that particular business for lump sum price agreed.

being slump sale, for assigning values to individual assets and liability, we got fair valuation from independent valuer. we assigned value to individual assets and liability as per valuation report.

the consideration which we paid for slump sale is lower than the fair value of assets and liabilities taken over. the difference we treated in out books as capital reserve.

can anybody help me to confirm whether treatment given by us is right or wrong?

Amol S Joglekar

Amol S Joglekar (Expert)
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13 November 2014 Yes. The treatment is correct. (While calculating depreciation for income tax, you will have to calculate on actual cost) For accountancy, the treatment given by you is correct.

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