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Unit 3: Accounting Standards (AS) – 14

Balance of Profit and Loss Account notes

21. In the case of an ‘amalgamation in the nature of merger’ the balance of the Profit and Loss
Account appearing in the financial statements of the transferor company is aggregated
with the corresponding balance appearing in the financial statements of the transferee
company. Alternatively, it is transferred to the General Reserve if any.

22. In the case of an ‘amalgamation in the nature of purchase’, the balance of the Profit and
Loss Account appearing in the financial statements of the transferor company whether
debit or credit, loses its identity.

Treatment of Reserve Specified in a Scheme of Amalgamation

23. The scheme of amalgamation sanctioned under the provisions of the Companies Act,
1956 or any other statute may prescribe the treatment to be given to the reserve of the
transferor company after its amalgamation. Where the treatment is so prescribed, the same
is followed.

Disclosure

24. For all amalgamations, the following disclosures are considered appropriate in the first
financial statements following the amalgamation:

(a) Names and general nature of business of the amalgamating companies;
(b) Effective date of amalgamation for accounting purpose;
(c) The method of accounting used to reflect the amalgamation; and
(d) Particulars of the scheme sanctioned under a statute.
25. For amalgamation accounted for under the pooling of interests method, the following
additional disclosures are considered appropriate in the first financial statements following
the amalgamation:
(a) Description and number of shares issued, together with the percentage of each
company’s equity shares exchanged to effect the amalgamation;

(b) The amount of any difference between the consideration and the value of net
identifiable assets acquired and the treatment thereof.
26. For amalgamations accounted for under the purchase method, the following additional
disclosures are considered appropriate in the first financial statements following the
amalgamation:
(a) Consideration for the amalgamation and a description of the consideration paid or
contingently payable; and
(b) The amount of any difference between the consideration and the value of net
identifiable assets acquired, and the treatment thereof, including the period of
amortisation of any goodwill arising on amalgamation.

amalgamation after the Balance sheet Date

27. 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 is made in accordance
with ‘AS-4, ‘Contingencies and Events Occurring after the Balance Sheet Date, but the
amalgamation is not incorporated in the financial statements. In certain circumstances, the
amalgamation may also provide additional information affecting the financial statements
themselves; for instance, by allowing the going concerned assumption to be maintained.

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