ACCOUNTING STANDARD - 14

ACCOUNTING FOR AMALGAMATIONS

J.P., KAPUR & UBERAI

PURPOSEPURPOSE

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

TYPES OF AMALGAMATIONSTYPES OF AMALGAMATIONS

NATURE OF MERGER

NATURE OF PURCHASE

J.P., KAPUR & UBERAI

CONDITIONS FOR NATURECONDITIONS FOR NATURE OF MERGER 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

METHODS FOLLOWEDMETHODS FOLLOWED

NATURE OF MERGER -- Pooling of Interests method

NATURE OF PURCHASE -- Purchase method

J.P., KAPUR & UBERAI

POOLING OF INTERESTS POOLING OF INTERESTS METHODMETHOD

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

PURCHASE METHOD 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

PURCHASE METHODPURCHASE 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

PURCHASE METHODPURCHASE METHOD If

Consideration > Net Asset value

GOODWILL

Consideration < Net Asset value CAPITAL

RESERVE

J.P., KAPUR & UBERAI

DISCLOSURESDISCLOSURES

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

DISCLOSURESDISCLOSURESFROM 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