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Unit 3: Accounting Standards (AS) – 14

Fair value: It is the amount for which an asset could be exchanged between a knowledgeable, notes
willing buyer and a knowledgeable, willing seller in an arm’s length transaction.
Pooling of Interest: Pooling of interest is a method of accounting for amalgamation, the object
of which is to, account for the amalgamation as if the separate businesses of the amalgamating
companies were intended to be continued by the transferee company.
Reserve: It 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.
Transferee Company: It means the company into which a transferor company is amalgamated.
Transferor Company: It means the company, which is amalgamated into another company.

3.4 review Questions

1. Define the term accounting standards.
2. What do you mean by amalgamation?
3. Explain the pooling of interest method.
4. Discuss the types of amalgamation.
5. How reserves on amalgamation are treated in accounting standards?

6. Discuss the factors which may be considered in estimating the useful life of goodwill
arising on amalgamation.
7. For amalgamations accounted for under the purchase method, some disclosures are
considered appropriate in the first financial statements. What are they?
8. Explain the following terms:
(a) Fair value
(b) Consideration

answers: self assessment

1. Guide 2. Standard

3. Fair value 4. Identity
5. Transferor 6. Amalgamation
7. True 8. True
9. False

3.5 further readings

Books
John Blake and Henry J. Lunt, Accounting Standards.
Opperman, 14 Edition, Accounting Standards.
th
Opperman H. R. B., Booysen S. F., Binnekade C. S. and Oberholster J. G. I. Twelfth
Edition, Accounting Standards.

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