Method of amalgamation as per AS 14?

Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 ROSHNI asked over 3 years ago

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8 Answers
Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Pankaj answered almost 3 years ago

As per AS 14 on ‘Accounting for Amalgamations’, there are two main methods of accounting for amalgamations: (i) The Pooling of Interest Method Under this method, the assets, liabilities and reserves of the transferor company are recorded by the transferee company at their existing carrying amounts. If at the time of amalgamation, the transferor and the transferee companies have conflicting accounting policies, a uniform set of accounting policies is adopted following the amalgamation. The effects on the financial statements of any changes in accounting policies are reported in accordance with AS 5 on ‘Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies’. (ii) The Purchase Method Under the purchase method, the transferee company accounts for the amalgamation either by incorporating the assets and liabilities at their existing carrying amounts or by allocating the consideration to individual identifiable assets and liabilities of the transferor company on the basis of their fair values at the date of amalgamation. The identifiable assets and liabilities may include assets and liabilities not recorded in the financial statements of the transferor company. Where assets and liabilities are restated on the basis of their fair values, the determination of fair values may be influenced by the intentions of the transferee company

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Open uri20170510 32134 1c996lj?1494421732 Anil answered almost 3 years ago

There are two main methods of accounting for amalgamations: (a) the pooling of interests method; and (b) the purchase method. 8. The use of the pooling of interests method is confined to circumstances which meet the criteria referred to in paragraph 3(e) for an amalgamation in the nature of merger. 9. The object of the purchase method is to account for the amalgamation by applying the same principles as are applied in the normal purchase of assets. This method is used in accounting for amalgamations in the nature of purchase. The Pooling of Interests Method 10. Under the pooling of interests method, the assets, liabilities and reserves of the transferor company are recorded by the transferee company at their existing carrying amounts (after making the adjustments required in paragraph 11). 11. If, at the time of the amalgamation, the transferor and the transferee companies have conflicting accounting policies, a uniform set of accounting policies is adopted following the amalgamation. The effects on the financial statements of any changes in accounting policies are reported in accordance with Accounting Standard (AS) 5, Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies. The Purchase Method 12. Under the purchase method, the transferee company accounts for the amalgamation either by incorporating the assets and liabilities at their existing carrying amounts or by allocating the consideration to individual identifiable assets and liabilities of the transferor company on the basis of their fair values at the date of amalgamation. The identifiable assets and liabilities may include assets and liabilities not recorded in the financial statements of the transferor company. 13. Where assets and liabilities are restated on the basis of their fair values, the determination of fair values may be influenced by the intentions of the transferee company. For example, the transferee company may have a specialised use for an asset, which is not available to other potential buyers. The transferee company may intend to effect changes in the activities of the transferor company which necessitate the creation of specific provisions for the expected costs, e.g. planned employee termination and plant relocation costs.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 CA Sandeep Bohra answered almost 3 years ago

Dear friend, **There are two main methods of accounting for amalgamations:** **1. The Pooling of Interests Method** Under the pooling of interests method, the assets, liabilities and reserves of the transferor company are recorded by the transferee company at their existing carrying amounts. If, at the time of the amalgamation, the transferor and the transferee companies have conflicting accounting policies, a uniform set of accounting policies is adopted following the amalgamation. The effects on the financial statements of any changes in accounting policies are reported in accordance with Accounting Standard (AS) 5, Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies. **2. The Purchase Method** Under the purchase method, the transferee company accounts for the amalgamation either by incorporating the assets and liabilities at their existing carrying amounts or by allocating the consideration to individual identifiable assets and liabilities of the transferor company on the basis of their fair values at the date of amalgamation. The identifiable assets and liabilities may include assets and liabilities not recorded in the financial statements of the transferor company. Where assets and liabilities are restated on the basis of their fair values, the determination of fair values may be influenced by the intentions of the transferee company. For example, the transferee company may have a specialised use for an asset, which is not available to other potential buyers. The transferee company may intend to effect changes in the activities of the transferor company which necessitate the creation of specific provisions for the expected costs, e.g. planned employee termination and plant relocation costs.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 lochan answered over 3 years ago

**METHOD OF AMALGAMATION AS PER AS 14** In order to provide a clear guideline for accounting for amalgamation, the Institute of Chartered Accountants of India has issued Accounting Standard 14 (AS-14) which deals with ‘Accounting for Amalgamation.’ AS-14 is effective since the accounting period beginning on or after 1.4.1995 and is mandatory in nature. The statement to these standard states that ‘Amalgamation’ means ‘an amalgamation pursuant to the provisions of the Companies Act, 1956 or any other statute which may be applicable to companies’. As per AS 14 there are two types of Amalgamation: Amalgamation in the nature of Merger; and Amalgamation in the Nature of Purchase. Amalgamation in the nature of Merger The amalgamations where there is a genuine pooling not merely of the assets and liabilities of the amalgamating companies but also of the shareholders’ interests and of the businesses of these companies, is called amalgamations in the nature of ‘merger’. An amalgamation which satisfies all of the following conditions is considered as amalgamation in the nature of merger: (i) All the assets and liabilities of the transferor company become the assets and liabilities of the transferee company. (ii) Shareholders holding not less than 90 per cent of the face value of the equity shares of the transferor company (other than the equity shares already held therein immediately before the amalgamation, by the transferee company or its subsidiaries or their nominees) become equity shareholders of the transferee company by virtue of the amalgamation. (iii) The consideration for the amalgamation receivable by those equity shareholders of the transferor company who agree to become equity shareholders of the transferee company is discharged by the transferee company wholly by the issue of equity shares in the transferee company, except that cash may be paid in respect of any fractional shares. (iv) The business of the transferor company is intended to be carried on, after the amalgamation, by the transferee company. (v) No adjustment is intended to be made to the book values of the assets and liabilities of the transferor company when they are incorporated in the financial statements of the transferee company except to ensure uniformity of accounting policies. In this type of amalgamation (amalgamation in the nature of merger), there is a genuine pooling of assets and liabilities of the combining entities. In addition, equity shareholders of the combining entities continue to have a proportionate share in the combined entity. Amalgamation in the Nature of Purchase: An amalgamation is considered to be in the nature of purchase when any one or more of the five conditions specified for amalgamations in the nature of merger as stated above is not satisfied. In this type of amalgamation, one company acquires another company and the equity shareholders of the combining entities do not continue to have a proportionate share in the equity of the combined entity or the business of the company which is acquired is not intended to be continued after the amalgamation. For example, X Ltd. acquires the business of Y Ltd. with no intention to continue such business, it is a case of amalgamation in the nature of purchase and not in the nature of merger. Similarly, if shareholders of Y Ltd. holding 90% or more of the share capital do not become shareholders of X Ltd., the amalgamation is in the nature of purchase. Further, if the assets and liabilities are recorded at revised values in the books of the transferee company, it is an amalgamation in the nature of purchase Thanks

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Picsjoin 2017224123730582 Archana answered over 3 years ago

Hie Roshni, **Methods of Accounting for Amalgamations :-** There are two main methods of accounting for amalgamations: (a) the pooling of interests method; (in case of amalgamation in the nature of merger) and (b) the purchase method (in case of amalgamations in the nature of purchase) 1. The Pooling of Interests Method ================================== - Under the pooling of interests method, the assets, liabilities and reserves of the transferor company are recorded by the transferee company at their existing carrying amounts. - If, at the time of the amalgamation, the transferor and the transferee companies have conflicting accounting policies, a uniform set of accounting policies is adopted following the amalgamation. The effects on the financial statements of any changes in accounting policies are reported in accordance with Accounting Standard (AS) 5, Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies. 2. The Purchase Method =================== - Under the purchase method, the transferee company accounts for the amalgamation either by incorporating the assets and liabilities at their existing carrying amounts or by allocating the consideration to individual identifiable assets and liabilities of the transferor company on the basis of their fair values at the date of amalgamation. The identifiable assets and liabilities may include assets and liabilities not recorded in the financial statements of the transferor company. - Where assets and liabilities are restated on the basis of their fair values, the determination of fair values may be influenced by the intentions of the transferee company. For example, the transferee company may have a specialised use for an asset, which is not available to other potential buyers. The transferee company may intend to effect changes in the activities of the transferor company which necessitate the creation of specific provisions for the expected costs, e.g. planned employee termination and plant relocation costs.

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Open uri20170510 32134 tcchcu?1494421832 Jitendra Suthar answered over 3 years ago

Hiiii friend.... Methods of Amalgamation are: **1. Amalgamation in nature of merger** .1. In the event of two entities coming together. If all five conditions stated in AS 14 are fulfilled it is treated as amalgamation in nature of merger. The conditions are as follows: 2. All the assets and liabilities of the transferor company become the assets and liabilities of the transferee company. 3. Shareholders of the transferor company holding not less than 90% of the face value of equity shares become the shareholders of transferee company by virtue of amalgamation. 4. Consideration made to equity shareholders of transferor company is in the form of equity shares in the transferee company, except in case of fractional shares cash can be paid. 5. The business of the transferor company is intended to be carried on by the transferee company even after amalgamation. 6. Assets and liabilities of the transferor company are incorporated in the books of the transferee company at book value except to ensure uniform accounting policies. **Pooling of Interest method** 1. In preparing financial statements of the transferee company, assets, liabilities and reserves of the transferor company should be recorded as existing carrying amounts and in the same form at the date of amalgamation, balance of the profit and loss account of the transferor company should be aggregated with the corresponding balance of the transferee company or transferred to general reserve if any. 2. If at the time of amalgamation the accounting policies followed by the transferor company and transferee company are in conflict, it should be resolved, and brought in line with the policies of the transferee company. 3. The difference between the amount recorded in share capital issued and the amount of share capital issued by the transferor company should be adjusted in reserves, however in some cases courts may stipulate the manner in which the reserves should be adjusted. **2. Amalgamation in nature of purchase** What is not a merger is a purchase. **Purchase method** In purchase method accounting for amalgamation is done by applying same principles used in accounting for normal purchase of assets. Some of the rules adopted are the following. 1. The Assets and liabilities (not reserves) of the transferor company are incorporated in the books of transferee company at the existing amounts. Alternatively, the purchase consideration should be allocated individual identified Assets and liabilities on the basis of their fair values at the date of amalgamation. 2. Non statutory reserves of the transferor company are not included in the financial statements of the transferee company. 3. If purchase consideration > net assets, the difference is debited to the good will account. If purchase consideration < net assets, the difference is credited to the capital reserve account. 4. The goodwill arising on amalgamation should be amortized to income over the five useful life. however if some what a longer period is justifiable the period of amortization can be extended. 5. Where the requirements of the relevant statute so demands, statutory reserves should be recorded in the financial statement of the transferee company.(credit statutory reserves, debit „Amalgamation adjustment account‟). When legal requirements no longer warrants maintenance of such reserve a reverse entry is passed. The Amalgamation adjustment account should be disclosed in the bal-ance sheet under the heading „Miscellaneous Expenditure‟. Regards,

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Data?1494421730 rohit awasthi answered over 3 years ago

Hii Roshni ** Method of Amalgamation ** As per AS 14 on ‘Accounting for Amalgamations’, there are two main methods of accounting for amalgamations: (i) The Pooling of Interest Method Under this method, the assets, liabilities and reserves of the transferor company are recorded by the transferee company at their existing carrying amounts. If at the time of amalgamation, the transferor and the transferee companies have conflicting accounting policies, a uniform set of accounting policies is adopted following the amalgamation. The effects on the financial statements of any changes in accounting policies are reported in accordance with AS 5 on ‘Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies’. (ii) The Purchase Method Under the purchase method, the transferee company accounts for the amalgamation either by incorporating the assets and liabilities at their existing carrying amounts or by allocating the consideration to individual identifiable assets and liabilities of the transferor company on the basis of their fair values at the date of amalgamation. The identifiable assets and liabilities may include assets and liabilities not recorded in the financial statements of the transferor company. Where assets and liabilities are restated on the basis of their fair values, the determination of fair values may be influenced by the intentions of the transferee company. Thanks

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Open uri20170510 32134 8wx65y?1494421689 Charan Reddy answered over 3 years ago

Types and Method of Accounting In general, there are two types of amalgamation and method of accounting, they are: Nature of Amalgamation Method of Accounting Merger Pooling of Interest method Purchase Purchase method **Amalgamation in nature of merger** In the event of two entities coming together. If all five conditions stated in AS 14 are fulfilled it is treated as amalgamation in nature of merger. The conditions are as follows: All the assets and liabilities of the transferor company become the assets and liabilities of the transferee company. Shareholders of the transferor company holding not less than 90% of the face value of equity shares become the shareholders of transferee company by virtue of amalgamation. Consideration made to equity shareholders of transferor company is in the form of equity shares in the transferee company, except in case of fractional shares cash can be paid. The business of the transferor company is intended to be carried on by the transferee company even after amalgamation. Assets and liabilities of the transferor company are incorporated in the books of the transferee company at book value except to ensure uniform accounting policies. **Pooling of Interest method** In preparing financial statements of the transferee company, assets, liabilities and reserves of the transferor company should be recorded as existing carrying amounts and in the same form at the date of amalgamation, balance of the profit and loss account of the transferor company should be aggregated with the corresponding balance of the transferee company or transferred to general reserve if any. If at the time of amalgamation the accounting policies followed by the transferor company and transferee company are in conflict, it should be resolved, and brought in line with the policies of the transferee company. The difference between the amount recorded in share capital issued and the amount of share capital issued by the transferor company should be adjusted in reserves, however in some cases courts may stipulate the manner in which the reserves should be adjusted. **Amalgamation in nature of purchase** What is not a merger is a purchase. **Purchase method** In purchase method accounting for amalgamation is done by applying same principles used in accounting for normal purchase of assets. Some of the rules adopted are the following. The Assets and liabilities (not reserves) of the transferor company are incorporated in the books of transferee company at the existing amounts. Alternatively, the purchase consideration should be allocated individual identified Assets and liabilities on the basis of their fair values at the date of amalgamation. Non statutory reserves of the transferor company are not included in the financial statements of the transferee company. If purchase consideration > net assets, the difference is debited to the good will account. If purchase consideration < net assets, the difference is credited to the capital reserve account. The goodwill arising on amalgamation should be amortized to income over the five useful life. however if some what a longer period is justifiable the period of amortization can be extended. Where the requirements of the relevant statute so demands, statutory reserves should be recorded in the financial statement of the transferee company.(credit statutory reserves, debit „Amalgamation adjustment account‟). When legal requirements no longer warrants maintenance of such reserve a reverse entry is passed. The Amalgamation adjustment account should be disclosed in the bal-ance sheet under the heading „Miscellaneous Expenditure‟.

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