ACCOUNTING STANDARD- 14

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ACCOUNTING STANDARD - 14
ACCOUNTING FOR AMALGAMATIONS
J.P., KAPUR UBERAI
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PURPOSE

• Accounting for amalgamations,
• Treatment of any resultant goodwill or
  reserves.
• It does not deal with acquisition by one company
  of another company in consideration for payment
  in cash or by issue of shares.

J.P., KAPUR UBERAI
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TYPES OF AMALGAMATIONS

• NATURE OF MERGER
• NATURE OF PURCHASE

J.P., KAPUR UBERAI
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CONDITIONS FOR NATURE OF MERGER

• All the assets and liabilities are transferred
• Shareholders holding not less than 90 of the
  face value of the equity shares of the
  transferor company become shareholders of
  transferee company
• The consideration is discharged by the issue of
  equity shares in the transferee company
• The business of the Transferor Company is
  intended to be carried on
• No adjustment to be made to the book values of
  the assets and liabilities.

J.P., KAPUR UBERAI
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METHODS FOLLOWED

• NATURE OF MERGER -- Pooling of Interests
  method
• NATURE OF PURCHASE -- Purchase method

J.P., KAPUR UBERAI
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POOLING OF INTERESTS METHOD

• The assets, liabilities and reserves are
  recorded at their existing carrying amounts.
• Uniform set of accounting policies is adopted.
• The difference between the share capital
  issued and the share capital of the transferor
  company should be adjusted in reserves.

J.P., KAPUR UBERAI
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PURCHASE METHOD

• The assets liabilities are recorded either at
  existing carrying values or by allocating the
  consideration on the basis of Fair values on the
  date of amalgamation.
• The reserves of the transferor company, other
  than the statutory reserves, should not be
  included in the financial statements of the
  transferee company.
• 
  
  Contd..

J.P., KAPUR UBERAI
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PURCHASE METHOD

• CONSIDERATION
• Securities
• Cash
• Other assets
• In determining the value of the consideration, an
  assessment is made of the fair value of its
  elements.

J.P., KAPUR UBERAI
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PURCHASE METHOD

• If
• Consideration gt Net Asset value GOODWILL
• Consideration lt Net Asset value
  CAPITAL RESERVE

J.P., KAPUR UBERAI
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DISCLOSURES

• FIRST YEAR - BOTH NATURES OF AMALGAMATION
• names and general nature of business of the
  amalgamating companies
• effective date of amalgamation for accounting
  purposes
• the method of accounting used to reflect the
  amalgamation and
• particulars of the scheme sanctioned under a
  statute.

J.P., KAPUR UBERAI
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DISCLOSURES

• FROM SECOND YEAR
• Pooling of Interests method
• (a) description and number of shares issued,
• (b) the amount of any difference between the
• consideration and the value of net assets
  acquired
• Purchase method
• (a) a description of the consideration paid or
  payable
• (b) any difference between the consideration and
  
• the value of net assets acquired.

J.P., KAPUR UBERAI