Priyanka (article) (59 Points)
09 March 2010Dear all,
When assets are revalued for cal of intrinsic value of shares ( fpr puchase consi purpose ) but are to be taken over at book values in the purchasing company's books , what will b the method ???... whilst all other conditions for merger are satisfied ??
Santhosh Poojary
(SIEMPRE AHÍ PARA TI)
(15607 Points)
Replied 09 March 2010
All assets and liabilities of transforer is to be taken over at their book
· All or at least 90% of the Share Holding of Amalgamating Company must
be the Share Holders of Amalgamated Company.
· Equity shares of selling company must be given only equity shares of
purchasing company.
· Liabilities of Transferor must not be discharged; it must be taken over by
the resulting company. But exemption is the fraction shares can be given
in cash.
· Same risk and return and nature of company must be same.
2. Order of Adjustment of consideration is first General Reserve and then P & L a/c.
If the problem has statutory reserve it should not be adjusted. It is carried over as
such.
3. As per SEBI guidelines, underwriting commission is 2.5% on equity shares and
on 1st 5000 Preference Shares it is 1.5% and the balance Preference Shares it is
1%.
4. Capital employed is considered as Net Revaluation amount of Tangible Asset.
5. In case purchasing company holding shares in selling company, Net asset method
is applied as usual and outside shareholders portion is calculated separately as
balancing figure.
6. If in the above case, settlement of equity share holding of selling company is
given then that exchange pertains to outside share holder’s settlement and it
should not be splitted.
7. In the books of selling company the shares held by the purchasing company must
be cancelled by transferring it to realization a/c
Equity share capital a/c Dr
To Realization
8. If Preference share holders of selling company is discharged by preference share
holders of purchasing company at premium then the premium portion must be
transferred to realization a/c in the books of selling company.
9. In case of Merger while drafting Journal Entry in the books of purchasing
company for Incorporation of Asset & Liability in the workings, the consideration
is aggregate consideration including shares already purchased by purchasing
company and current purchase payable.
10. In case of merger in the books of purchasing company while calculation excess /
shortage to be adjusted against the reserve of selling company. The purchase
consideration is aggregate consideration including amount already paid (shares of
selling company held by purchasing company) + amount now paid (amount paid
to outsiders).
11. Business purchase in case of shares of selling company held by purchasing
company is the amount given to outsiders only.
CAclubindia
