Professional Documents
Culture Documents
Purnima Satija
Assistant Professor
PCTE Group of Institutes
Plan of Study
Introduction to Reconstruction
Meaning of Amalgamation
Features of Amalgamation
Objectives of Amalgamation
Types of Amalgamation
Purchase Consideration
AS-14
3
Reconstruction
When a company is suffering loss for several past years and
suffering from financial difficulties
4
Contd
5
Contd
9
Important Definitions
10
Features of Amalgamation
Diversification To avoid
To reduce cost
& Expansion competition
Enlarging
Increasing Expanding the
managerial
market share product line
expertise
Maximizing Achieving
financial technological
potential success
12
Meaning of Amalgamation
1. All assets & Liabilities of the transferor company become the assets &
liabilities of transferee co. after amalgamation.
2. Shareholders holding not less than 90% of face value of equity share
capital of the transferor company (other than equity shares already
held therein, immediately before the amalgamation, by the transferee
company or its subsidiaries or their nominees) become the equity
shareholders of the transferee by virtue of the amalgamation.
Contd
4. The business of transferor company is intended to be carried on, after
the amalgamation by the transferee company.
Consideration
Net Assets Method or Net
Worth Method
The term liabilities will mean all liabilities to third parties. It will
exclude items appearing under Reserves & Surplus as these are
payable to shareholders.
The term Trade Liabilities will include trade creditors and bills
payable and will exclude other liabilities to third parties such as
bank overdraft, outstanding expenses.
Contd
The term Business Takeover means that the transferee company
has agreed to take over all the assets of the transferor company and
liabilities to outsiders.
The shares shall be issued in whole number and not in fraction. The
fractional shares must be valued at the market price and shall be
paid in cash.
B does not take over cash but agrees to assume the liability of
sundry creditors at Rs. 5,000
Stock-13,000
Debtors:- Rs.8,000
3. Net Payment Method
Under this method the value of purchase consideration is
ascertained by adding the various payments made by the
transferee company to the shareholders of the transferor
company.
Set Ltd. Takes over the business of Upset Ltd. At the following
terms:-
The shareholders of Upset Ltd. Are to be paid Rs. 25 in cash and the
offer of 4 equity shares of Rs. 10 each in Set Ltd. For every share of
Upset Ltd. The shares of Upset Ltd. Consists of 5,000 shares.
The payment of Rs. 20 in cash and the exchange of two fully paid
shares in A Ltd. for every share in B Ltd. The share capital of the
vendor company consists of 20,000 shares of Rs. 25 each fully paid.
Note :The difference between debits & credits is adjusted in the reserves
of transferee company.
(3) For making payment to the liquidator of transferor co.
Liquidators of transferor Co. a/c Dr.
To Bank/Share Capital/Security Premium