ACCOUNTINGDOSE

AMALGAMATION INTER COMPANY HOLDINGS Intercompany holdings are divided into three types Purchasing company holding shares in selling company Selling company holding shares in purchasing company Purchasing company and selling company hold shares in each other Selling company holding shares in purchasing company Let us assume the assets of selling company (excluding inter company investment)=Rs.1600000/- Share capital of selling company = 100000 Fair value of purchasing company shares= Rs.10/- Issue price of purchasing company shares= Rs.20/- Share exchange ratio= 1 share for each share of selling company Computation of purchase consideration Payments method: Step:1 Calculate number of shares to be issued by purchasing company to selling company Exchange ratio= 1:1 Existing total shares of selling company = 100000 so total number of shares issued by purchasing company will be 100000shares Step:2 Deduct number of shares already held b...

AMALGAMATION INTER COMPANY HOLDINGS Inter company holdings are divided into three types Purchasing company holding shares in selling company Selling company holding shares in purchasing company Purchasing company and selling company hold shares in each other Purchasing company holding shares in selling company Purchasing company is holding 20% shares in selling company, let us assume fair value of net assets of selling ltd Rs.80 lakhs

Step 1 Identify nature of Amalgamation If the six conditions of amalgamation in nature of merger not satisfied then it is treated as amalgamation in nature of purchase. If the information provided in the question is not sufficient to decide the nature of amalgamation or question is silent on the nature of amalgamation then it is better to assume the nature of amalgamation as purchase. Step 2 Method of accounting  After identifying the nature of amalgamation the method of accounting is determined, it may be as follows:- Nature of Amalgamation Method of Accounting Merger Pooling of Interest Method Purchase Purchase Method Step 3 Purchase consideration Purchase consideration is amount payable by transferee company (purchasing accompany) to transferor company (selling company) at the event of amalgamation. The payment may be in the mode of shares, debentures and cash. The purchase consideration may be in lum...