In case of Amalgamation, Purchase consideration is the price which is paid by the purchasing company (Transferee Company) for the purchase of business of the Vendor Company (Transferor Company).
**Purchase consideration = shares & other securities issued + Cash Payment +other assets by the transferee company to the shareholders of the transferor company.**
Methods of Calculating purchase consideration:
**Lump Sum Method**: - Purchase consideration = Fixed sum agreed to be paid by the Transferee to the transferor company.
**Net asset method**: - Purchase consideration = Net worth of the assets (Agreed value of entire asset – Agreed value of liabilities), taken over by the transferee company.
**Net payment method**: - Purchase consideration = All the payments made by the transferee company to the shareholders of the transferor company in the form of cash, shares or debentures.
**Intrinsic value or share exchange method**: - Purchase consideration = Net asset available to the equity shareholders /No.of equity shares.