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MEANING OF AMALGAMATION
Amalgamation is a form of combination. It is brought about by the fusion of blending of two or more undertakings carrying on the same type of business ,or engaged in the same line of business activity.
OBJECTIVES OF AMALGAMATION
a) Elimination of competition b) Production of goods and services on a large scale c) Securing a large share of a market d) Maintaining price by regulating output e) Equitable distribution of what is produced
OBJECTIVES CONTD
f) Building up goodwill g)Securing economies of scale such as technical,financial,managerial and marketing h)Avoiding duplications and reducing costs i) Introducing schemes of rationalisation j) Promoting research and development
PURCHASE CONSIDERATION
CONSIDERATION
FOR THE AMALGAMATION MEANS THE AGGREGATE OF THE SHARES AND OTHER SECURITIES ISSUED AND THE PAYMENT MADE IN THE FORM OF CASH OR OTHER ASSETS BY THE TRANSFERRE COMPANY TO THE SHARE HOLDERS OF THE TRANSFEROR COMPANY. Purchase consideration should comprise shares and other securities issued as well as cash payment to the shareholders of the transferor company but not made any payment made to liquidate.
TREATMENT OF LIABILITIES
The liabilities to be deducted from out of the total assets taken over by the transferee company are only outside or liabilities to third parties. These include trade liabilities such as sundry creditors and bills payable , outstanding liabilities for expenses ,secured and unsecured loans such as debentures and bank overdraft ,liabilities to workmen such as workmens savings deposits ,provident fund ,profit -sharing fund, gratuity fund ,etc.
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ii. For transfer of liabilities of liabilities taken over: each liability A/c Dr. to realisation A/c
iii. For purchase consideration due: transferee company A/c to realisation A/c
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iv.
For expenses of realisation: realisation A/c Dr. to bank A/c (when paid for by the transferor company)
ii.
For taking over assets and liabilities each asset A/c to each asset A/c to provision A/c to profit and loss A/c to reserve A/c to business purchase A/c
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(with book value) (with book value) (with book value) (with book value) (with purchase consideration)
iii. for payment of purchase consideration liquidator of transfer Co. A/c to share capital A/c to share premium A/c to bank A/c
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iv. For realisation expenses borne: liquidation expenses A/c to bank A/c
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Profit and loss A/c to liquidation expenses A/c v. For formation expenses: preliminary expenses A/c to bank A/c
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ii.
For assets and liabilities taken over: each asset A/c to each liability A/c to business purchase A/c
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iii.
for discharge of purchase consideration: liquidator of transferor Co. A/c to share capital A/c to share premium a/c to debentures A/c to bank A/c
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Dr.
v.
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