What are the conditions which according to AS 14 on accounting for amalgamations must be satisfied for an amalgamation in the nature of merger?
As per standard, an amalgamation should be considered to be an “amalgamation in the nature of merger” when all the following conditions are satisfied: All assets and liabilities of the transferor company become, after amalgamation, the assets, and liabilities of the transferee company.
What happens to share capital on amalgamation?
Generally, under subparagraph 87(2)(d)(ii), the capital cost to the new corporation of depreciable property of a prescribed class acquired by it on the amalgamation will equal the cost amount, immediately before the amalgamation, to a predecessor corporation of each property included in that class by the new …
What does amalgamation and capital mean?
Amalgamation is the combination of two or more companies into a brand new entity by combining the assets and liabilities of both entities into one. This differs from a traditional merger in that neither of the two companies involved survives as an entity.
How do you account for amalgamation?
There are two main methods of accounting for amalgamations: (a) the pooling of interests method; and (b) the purchase method. 8. The use of the pooling of interests method is confined to circumstances which meet the criteria referred to in paragraph 3(e) for an amalgamation in the nature of merger.
What are the scope of AS 14?
AS 14 – Accounting for Amalgamations. Purpose and Scope: This statement deals with accounting for amalgamations and the treatment of any resultant goodwill or reserves.
What is capital reserve account?
What Is a Capital Reserve? A capital reserve is a line item in the equity section of a company’s balance sheet that indicates the cash on hand that can be used for future expenses or to offset any capital losses. It is derived from the accumulated capital surplus of a company and is created out of its profit.
What happens to losses on amalgamation?
The capital and non-capital losses will carry over into the newly amalgamated company to be used against any future income or gains generated after the amalgamation. The amalgamated company will be able to use the losses starting in the year that the amalgamation takes place.
Can you amalgamate two companies with different shareholders?
Corporate law contemplates the following types of amalgamation: Corporate amalgamation is that of two or more corporations with different shareholders; Short-form vertical amalgamation is that of a parent corporation with one or more of its wholly owned subsidiaries.
What do you understand by amalgamation as per AS 14?
Amalgamation means an amalgamation pursuant to the provisions of the Companies Act, 2013 or any other statute which may be applicable to companies and includes ‘merger’. Transferor company means the company which is amalgamated into another company.
What is amalgamation in financial accounting?
Amalgamation is defined as the combination of one or more companies into a new entity. It includes: Two or more companies join to form a new company.
What are the different methods of amalgamation?
There are two types of amalgamation, including merger and purchase methods. In both cases, the legal entity of the preexisting companies vanishes, replaced by a new company with combined assets and liabilities.
What are the accounting standards for amalgamations?
1. This standard deals with accounting for amalgamations and the treatment of any resultant goodwill or reserves. This standard is directed principally to companies although some of its requirements also apply to financial statements of other enterprises. 2.
When does an amalgamation affect the financial statements?
When an amalgamation is effected after the balance sheet date but before the issuance of the financial statements of either party to the amalgamation, disclosure should be made in accordance with AS 4, Contingencies and Events Occurring After the Balance Sheet Date, but the amalgamation should not be incorporated in the financial statements.
When are adjustments to the consideration made in amalgamation?
Many amalgamations recognise that adjustments may have to be made to the consideration in the light of one or more future events. When the additional payment is probable and can reasonably be estimated at the date of amalgamation, it is included in the calculation of the consideration.
What does amalgamation mean under Companies Act 2013?
(a) Amalgamation means an amalgamation pursuant to the provisions of the Companies Act, 2013 or any other statute which may be applicable to companies and includes ‘merger’. (b) Transferor company means the company which is amalgamated into another company.