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Unit 3: Accounting Standards (AS) – 14

notes

Notes The text of Accounting Standard (AS)-14, Accounting for Amalgamations,
issued by the Institute of Chartered Accountants of India will come into effect in respect of
accounting periods commencing on or after 1.4.1995 and will be mandatory in nature.

3.1 accounting standards

3. The following terms are used in this statement with the meaning specified:
(a) Amalgamation means an amalgamation pursuant to the provisions of the Companies
Act, 1956, or any other statute which may be applicable to companies.
(b) Transferor Company means the company, which is amalgamated into another
company.

(c) Transferee Company means the company into which a transferor company is
amalgamated.
(d) Reserve means the portion of earnings, receipts or other surplus of an enterprise
(whether capital or revenue) appropriated by the management for a general or a
specific purpose other than a provision for deprecation or diminution in the value of
assets or for a known liability.
(e) Amalgamation in the nature of merger is an amalgamation, which satisfies all the
following conditions:

(i) All the assets and liabilities of the transferor company become, after
amalgamation, the assets and liabilities of the transferee company.
(ii) Shareholders holding not less than 90% of the face value of the equity shares
of the transferor company (other than the equity shares already held, therein,
immediately before the amalgamation, by the transferee company or its
subsidiaries or their nominees) become equity shareholders of the transferee
company by virtue of the amalgamation.
(iii) The consideration for the amalgamation receivable by those 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.
(iv) The business of the transferor company is intended to be carried on, after the
amalgamation, by the transferee company.
(v) 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.

(f) Amalgamation in the nature of purchase is an amalgamation that does not satisfy any
one or more of the conditions specified in sub-paragraph (e) above.
(g) Consideration for the amalgamation means for the aggregate of the shares and other
securities issued and the payment made in the form of cash or other assets by the
transferee company to the shareholders of the transferor company.

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