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AccountingforAmalgamation(asperAS14)
AccountingforAmalgamation(asper
AS14)
In general meaning Amalgamation implies
blendingoftwoormoreexistingentitiesinto
one, during the blending process blended
entities losing their identities and forming
intooneseparatelegalentityhavingitssole
identity.Amalgamationcouldbedoneeither
bythetransferoftwoormoreexistingentitytonewentityorbythetransferofoneormore
undertakingtoanexistingcompany.
This standard deals with accounting for amalgamation and the treatment of goodwill or
reserves and AS14 includes the direction for amalgamation of companies although its
some of the provisions also applies to other entities. It is important to understand the
differencebetweenthewordAmalgamationandAcquisition.
There are two methods of amalgamation viz. Amalgamation in the nature of
PurchaseandAmalgamationinthenatureofmerger.
Acquisition includes the purchase of whole or part of the shares or whole or part of the
assetsofanothercompanyinconsiderationofcashorthepaymentbywayofissuingthe
securitiesorpartlybyonemethodandpartlybyothermethod.Thedistinguishingfeature
oftheacquisitionisthatduringthisprocessthecompanywhoisacquireddoesnotlossits
existenceasseparateentity.
NOTE that the standards of accounting of amalgamation do not apply to the rules of
acquisition.
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AccountingforAmalgamation(asperAS14)
DEFINITION:
SHARETHIS(/includes/share_inc_more.asp?
mod_id=25966&module_name=articles&share_title2=AccountingforAmalgamation(asperAS
TRANSFERORCOMPANY:Companywhichisamalgamatedintoanothercompany.
14)&share_url2=http%3A%2F%2Fwww%2Ecaclubindia%2Ecom%2Farticles%2Faccounting%2Dfor%2Dama
TRANSFREECOMPANY:Acompanyintowhichatransferorcompanyisamalgamated.
RESERVE:Itisthatportionofearning,receiptorotherincomesoftheenterprisewhichis
attributabletosomegeneralorspecificpurposeotherthanprovisionfordepreciation.
AMALGAMATION IN THE NATURE OF MERGER: If it satisfies all the conditions
mentionedbelow:
Alltheassetsandliabilitiesofthetransferorbecometheassetsandliabilitiesofthe
transferee,afteramalgamation.
Notlessthan90%oftheequityshareholderagreestobecometheshareholdersof
thetransfereecompany.
Considerationfortheequityshareholdersofthetransferorcompanywhoagreesto
becometheshareholdersofthetransfereecompanyisdischargedwhollythroughthe
paymentbywayofissueofequitysharesorothersecuritiesoracombinationofboth,
onlythefractionofthesharecouldbepaidbywayofcash.
Businessofthetransferorcompanyisintendedtobecarriedout,afteramalgamation
bythetransfereecompany
Noadjustmentisintendedtobemadeinthebookvalueoftheassetsandliabilitiesof
thetransferorcompanywhentheyareincludedinthefinancialstatementofthe
transfereecompanyexcepttoensureuniformityintheaccountingpolicies.
AMALGAMATIONINTHENATUREOFPURCHASE:Ifanyoneoftheabovementioned
conditiongetdissatisfied,thensuchamalgamationwillbetreatedastheamalgamationin
thenatureofpurchase.
CONSIDERATION:Anypaymentmadebythetransfereetothetransferorbywayofequity
sharesofthetransfereecompanyoranyothersecurityorbywayofcashorotherassets
bythetransfereecompanytotheshareholdersofthetransferorcompany.
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AccountingforAmalgamation(asperAS14)
FAIRVALUE:Fair value is the amount for which a assets could be exchanged between
SHARETHIS(/includes/share_inc_more.asp?
mod_id=25966&module_name=articles&share_title2=AccountingforAmalgamation(asperAS
14)&share_url2=http%3A%2F%2Fwww%2Ecaclubindia%2Ecom%2Farticles%2Faccounting%2Dfor%2Dama
thetransferorandtransferee.
POOLINGOFINTERESTMETHOD:Thisisamethodofaccountingfortheamalgamation
thepurposeofwhichistoaccountforamalgamationasifTransfereeCompanycontinued
tobeoperatedasseparateentity.Accordingly,onlyminimalchangescanbedoneinthe
financialstatementoftheamalgamatingcompanies.
TREATMENTOFSOMEOFTHEITEMSATTHETIMEOFAMALGAMATION:
S.
No.
PARTICULAR
AMALGAMTION
IN
THE
NATUREOFMERGER
AMALGAMATION
THE
NATURE
IN
OF
PURCHASE
shall
not
continue
except
the
statutory
reserve,
RESERVE
http://www.caclubindia.com/articles/accountingforamalgamationasperas1425966.asp
reserve
mentioned
reserve,
allowance
reserveetc.
The entry shall be
recordedbydebitingthe
Amalgamation Reserve
Account and crediting
the
relevant
statue
account.
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AccountingforAmalgamation(asperAS14)
Whentheidentityofthe
SHARETHIS(/includes/share_inc_more.asp?
purpose as they appear in the reserve is no longer
mod_id=25966&module_name=articles&share_title2=AccountingforAmalgamation(asperAS
booksoftransferor.
required to be shown
14)&share_url2=http%3A%2F%2Fwww%2Ecaclubindia%2Ecom%2Farticles%2Faccounting%2Dfor%2Dama
share
reversed.
capital
and
other
In
capitaloftransferorcompanyis
tobeadjustedinthereservesin
be
the
consideration is more
financial
statement
of
transferee.
amalgamation
created
if
thanthenetassetvalue
of
the
transferor
resulting
capitalreserve.
The balance of profit and loss
account as appearing in the
BALANCE
2
OF PROFIT
AND
LOSS
ACCOUNT
financial
statement
of
the
in
of
the
the
similar
transferee
into
balance,
general
reservesifany.
WrittenbyRinkuGaur
Rinku07gaur@gmail.com
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