Page 47 - DCOM205_ACCOUNTING_FOR_COMPANIES_II

Accounting for Companies – II

notes accounting standard procedures

The Accounting Standard comprises paragraphs 28 to 46 of this statement. The Standard should
be read in the context of paragraphs 1 to 27 of this Standard and of the Preface to the Statements
of Accounting Standards.
28. An amalgamation may be either:

(a) An amalgamation in the nature of merger, or
(b) An amalgamation in the nature of purchase.
29. An amalgamation should be considered to be an amalgamation in the nature of merger
when all the following conditions are satisfied:

(a) All the assets and liabilities of the transferor company become, after amalgamation,
the assets and liabilities of the transferee company.
(b) 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.
(c) The consideration for the amalgamation receivable by those equity shareholders of
the transferor company who agree to become equity shareholders of the transferor
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.
(d) The business of the transferor company is intended to be carried on, after the
amalgamation by the transferee company.
(e) No adjustment is intended to be made to the book values of the assets and liability of
the transferor company when they are incorporated in the financial statements of the
transferee company, except to ensure uniformity of accounting policies.
30. An amalgamation should be considered to be an amalgamation in the nature of purchase,
when any one or more of the conditions specified in paragraph 29 is not satisfied.
31. When an amalgamation is considered to be an amalgamation in the nature of merger, it
should be accounted for the pooling of interest method described in paragraphs 33-35.

32. When an amalgamation is considered to be an amalgamation in the nature of purchase, it
should be accounted for under the purchase method described in paragraphs 36-39.

the pooling of interests method

33. In preparing the transferee company’s financial statements, the assets, liabilities and
reserves (whether capital or revenue or arising on revolution) of the transferor company
should be recorded at their existing carrying amounts and in the same form as on the date
of amalgamation. The balance of the Profit and Loss Account of the transferor company
should be aggregated with the corresponding balance of the transferee company or
transferred to the General Reserve, if any.
34. If, at the time of the amalgamation, the transferor and the transferee companies have
conflicting accounting policies, a uniform set of accounting policies should be adopted
following the amalgamation. The effects on the financial statements of any changes in
accounting policies should be reported in accordance with Accounting Standard (AS)-5.
Prior Period and Extraordinary Items and Changes in Accounting Policies.

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