CORPORATE FINANCIAL ACCOUNTING (I-2002) 2017-18 M.COM.- FIRST YEAR (II SEMESTER) --------------------------------------------------------------- CORPORATE FINANCIAL ACCOUNTING (I-2002) ----------------------------------------------------------- UNIT – II : AMALGAMATION & RECONSTRUCTION Dr. S.K.GHAI

LEARNING OBJECTIVES After you have gone through this unit, you should be able to describe – Meaning of Amalgamation & Absorption; Types of Amalgamation & Reconstruction; Difference between ‘Amalgamation in the nature of Merger’ and ‘Amalgamation in the nature of Purchase’; Difference between ‘External Reconstruction’ and ‘Amalgamation’; Purchase Consideration and its methods; Accounting treatment in the books of Transferor Company (Vendor) and Transferee Company (Buyer); Accounting for External Reconstruction Dr. S.K.GHAI

Amalgamation and Absorption Amalgamation : When two or more existing companies go into liquidation and a new company is formed to take over their business. Absorption : When an existing company acquires one or more existing companies. Dr. S.K.GHAI

TYPES OF AMALGAMATION MERGER PURCHASE Dr. S.K.GHAI

CONDITIONS FOR MERGER [Paragraph 3 (e) of AS-14] All the assets and liabilities of the transferor company become the assets and liabilities of the transferee company, after amalgamation. CONDITION NO.1 Dr. S.K.GHAI

CONDITIONS FOR MERGER [Paragraph 3 (e) of AS-14] Shareholders holding not less than 90% of the face value of the equity shares of the transferor company become equity shareholders of the transferee company, by virtue of the amalgamation.* * (other than the equity shares already held therein, immediately before the amalgamation, by the transferee company or its subsidiaries or their nominees) CONDITION NO.2 Dr. S.K.GHAI

CONDITIONS FOR MERGER [Paragraph 3 (e) of AS-14] The consideration for the amalgamation receivable by these 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. CONDITION NO.3 Dr. S.K.GHAI

CONDITIONS FOR MERGER [Paragraph 3 (e) of AS-14] The business of the transferor company is intended to be carried on, after the amalgamation, by the transferee company. CONDITION NO.4 Dr. S.K.GHAI

CONDITIONS FOR MERGER [Paragraph 3 (e) of AS-14] 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. CONDITION NO.5 Dr. S.K.GHAI

AMALGAMATION IN THE NATURE OF PURCHASE When any one or more of the five conditions, specified in Paragraph 3 (e) of AS-14, is not satisfied. Dr. S.K.GHAI

REFERENCE BOOKS Warren/Reeve/Duchac’s Corporate Financial Accounting 13E and CengageNOW™v2! Market-leading Corporate Financial Accounting (ISBN-13: 978-1285868783 ISBN-10: 1285868781) International Journal of Accounting and Finance (ISSN online:1752-8232 ISSN print: 1752-8224) Shukla S.M. & Gupta K.L., Corporate Financial Accounting (Sahitya Bhawan Publications) Gupta K.G., Corporate Financial Accounting (K.G.Publications) Gupta R.L. Advanced Financial Accounting, (S.Chand & Co.) Dr. S.K.GHAI

REFERENCE BOOKS 6. Maheshwari S.N., Advanced Accounting – Vol.II, (Vikas Publishing House) 7. Shukla M.C. & T.S.Grewal, Advanced Accountancy (Sultan Chand & Co.) 8. Jain & Narang, Financial Accounting (Kalyani Publishers) Dr. S.K.GHAI

THANKS! Dr.S.K.GHAI Dr. S.K.GHAI