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Accounting Aspects

The document outlines corporate restructuring strategies, focusing on accounting aspects of mergers and acquisitions (M&A) under Ind-AS 103 and Accounting Standard-14. It details the types of amalgamation, specifically the nature of merger and purchase, along with the accounting methods for each type, including the pooling of interest and purchase methods. Additionally, it explains the concept of purchase consideration in the context of amalgamation.

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VISHNU P MENON
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9 views11 pages

Accounting Aspects

The document outlines corporate restructuring strategies, focusing on accounting aspects of mergers and acquisitions (M&A) under Ind-AS 103 and Accounting Standard-14. It details the types of amalgamation, specifically the nature of merger and purchase, along with the accounting methods for each type, including the pooling of interest and purchase methods. Additionally, it explains the concept of purchase consideration in the context of amalgamation.

Uploaded by

VISHNU P MENON
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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CORPORATE

RESTRUCTURING
STRATEGIES
By Ajay Lunawat
B.Com., FCA, DISA (Dip), IFRS (Cert), SAP (FI-CA)
LEARNING OBJECTIVES

Accounting
Aspects of
M&A’s
RELEVANT ACCOUNTING
STANDARDS

With the notification of Ind-AS accounting


standards for specified companies, the
accounting for corporate restructuring has
undergone a sea change.
Ind-AS 103 on Business combination deals
with accounting of corporate restructuring.
Companies for which IndAS-103 is not
applicable, Accounting Standard-14 continues
to apply.
TYPES OF AMALGAMATION
AS PER AS 14
Types of
Amalgamatio
n

In the nature In the nature


of merger of purchase
AMALGAMATION IN THE
NATURE OF MERGER
 Amalgamation in the nature of merger when all the following conditions are
satisfied:
 (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
AMALGAMATION IN THE
NATURE OF PURCHASE

Amalgamation in the
nature of merger when
any one or more of the
conditions specified is
not satisfied
ACCOUNTING METHODS
FOR AMALGAMATION AS
PER AS 14
Types of
Amalgamatio
n

In the nature In the nature


of merger of purchase

Pooling of
Purchase
Interest
Method
Method
POOLING OF INTEREST
METHOD
 Only minimal changes are made in aggregating the individual
financial statements of the amalgamating companies.
 The assets, liabilities and reserves (whether capital or revenue
or arising on revaluation) of the transferor company should be
recorded at their existing carrying amounts and in the same
form as at the date of the 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.
 The difference between the amount recorded as share capital
issued (plus any additional consideration in the form of cash
or other assets) and the amount of share capital of the
transferor company should be adjusted in reserves.
PURCHASE METHOD
 The assets and liabilities of the transferor company should be
incorporated at their existing carrying amounts or, alternatively, the
consideration should be allocated to individual identifiable assets and
liabilities on the basis of their fair values at the date of amalgamation.
 The reserves (whether capital or revenue or arising on revaluation) of
the transferor company, other than the statutory reserves, should not
be included in the financial statements of the transferee company
except as in case of statutory reserve.
 Any excess of the amount of the consideration over the value of the
net assets of the transferor company acquired by the transferee
company should be recognized in the transferee company’s financial
statements as goodwill arising on amalgamation.
 If the amount of the consideration is lower than the value of the net
assets acquired, the difference should be treated as Capital Reserve.
PURCHASE CONSIDERATION
 The consideration for amalgamation means 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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