AMALGAMATIONS ACCOUNTING STANDARD - 14 ACCOUNTING FOR J.P., KAPUR & UBERAI

PURPOSE 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 AMALGAMATIONS NATURE OF MERGER NATURE OF PURCHASE J.P., KAPUR & UBERAI

CONDITIONS FOR NATURE 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 FOLLOWED NATURE OF MERGER -- Pooling of Interests method NATURE OF PURCHASE -- Purchase method J.P., KAPUR & UBERAI

POOLING OF INTERESTS METHOD 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 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 METHOD Securities Cash Other assets CONSIDERATION In determining the value of the consideration, an assessment is made of the fair value of its elements. J.P., KAPUR & UBERAI

PURCHASE METHOD If Consideration > Net Asset value GOODWILL Consideration < Net Asset value CAPITAL RESERVE J.P., KAPUR & UBERAI

DISCLOSURES 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

DISCLOSURES FROM 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