Amalgamation 2

Both are almost same except for that any excess net assets over consideration will be treated as goodwill recognised seperately in the first.....

While in the other the excess will be adjusted to the reserves( to those not being specifically stated to be maintained),.........

Just go by the logic concerned........

Just a difference of some conditions if such conditions are fulfilled then it would be in nature of merger or it wold be of purchase

1. All the assests & liablities taken over by Pur. Co.

2. Pur. Co. Carries on its business with such assests 

3 Assests & Liablities Should be taken at Book Value

4 At least 90% ESH shold be agree to become the shareholder of Pur. co.

5. PC will be paid only in Equity shares by pur. co.

IF IT WAS TAKEN OVER AT AGREED VALUE THEN ?

Just Simple If Assests & Liablities are not taken at same book value shown in B/S of vendor Company then amalgmation would be in nature of purchase 

Dear Students,

Let me summarise the points discussed above. AS 14 has to be read in full before starting this chapter

1. Go through the framework of what constitutes Transaction in the nature of merger clearly - IF those conditions are not met then it is in thenature of purchase

2. In problems - look for the following

a. Revaluation of assets and liabilities - do treat them as purchase

b. If there is settlement of cash along with shares - Look for if its for if cash has been settled only for Fractional shares. If not then you can treat thsi as purchase

c. While doing Purchase method - watch out for Statutory reserves if need to be carried in books - need to open an Additional account - Amalgamation adjustment account in assets and Statutory reserve in the liability to show them till the settlement is done .

3. Purchase consideration for nature of merger and purchase need to be calcualted first

a. PC is what you pay to the Shareholders - so dont take Debenture settlement as purchase considerations

b. If in Purchase method - need to calcualte Good will or capital reserve

 Purchase consideration settled for a company  if Greater than Net Assets THEN the value is recognised as Goodwill

Purchase consideration settled for a company if Lesser than Net Assets THEN the same is treated as Capital reserve

4. Watch out for any Dividend settlement to be made before the absorption/amalgamation . In that case Divident has to be reduced from P&L of current year from liabilities and settled from cash or bank account before drawing final b/s

5. If there is opening goodwill - note can be mentioned to not cosnidere for Net assets calculation and can be treated as intangible .

6. If there is no revaluation done and Goodwill is asked to be valued based on super profits method ..then please do take the Valued goodwill to the net assets calculation

Hope this helps.

Regards,

Satish.

Tejas Learning Centre - Bangalore.

"Where Knowledge is shared"

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