Scheme of Arrangement-accounting entry

Pursuant to the Scheme of Arrangement (“the Demerger Scheme”) between A and B  and their respective Shareholders as approved by the NCLT, which became effective in 2019 (effective date) on filing with the ROC, all assets and liabilities of the Investment division have been transferred from the (Transferor Company) to the company (Transferee company) on a going concern basis with effect from the appointed date (i.e. 1st April, 2017). However, Adjustment for Demarger Ledger is still being maintained with a debit balance. Should it be transferred to Capital Reserve? Applicable AS please.

Please guide.

Regards,

Replies (1)

If the Demerger Ledger has a debit balance and considering the transfer of assets and liabilities on a going concern basis, it might be adjusted against reserves like Capital Reserve if the scheme allows for such treatment and it aligns with accounting standards.

Review the specific terms of the Demerger Scheme approved by NCLT and accounting standards in India.  

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