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

2. 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

3. 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

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

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. REFERENCE BOOKS
Warren/Reeve/Duchac’s Corporate Financial Accounting 13E and CengageNOW™v2! Market-leading Corporate Financial Accounting (ISBN-13:  ISBN-10:  )
International Journal of Accounting and Finance (ISSN online: ISSN print:  )
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

12. 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

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