S.Y.B.

COM
CORPORATE ACCOUNTING
AS 14- ACCOUNTING FOR
AMALGAMATION

BY : Ankitha Pai
Dept. of commerce
Dr.D.Y.Patil ACS College,
Pimpri
INTRODUCTION

 AS 14 deals with Accounting for Amalgamation. Sec 391

to Sec 394 of the companies act governs the provision of
amalgamation.
 This standard is applicable with effect from 1-4-1995.

 Meaning of Amalgamation
Amalgamation means formation of a new company to
take over the business of atleast two existing companies
which go into liquidation.
 Meaning of absorption

Absorption means ,one existing company takes over

another existing company which goes into liquidation.

 Meaning of External Reconstruction

It takes place when an existing weak company goes into
liquidation and a new company is formed to take over its
business and run it under a new name.
 Amalgamation = Two or more liquidation and one
formation

 Absorption = One liquidation and No formation

 External Reconstruction = One liquidation and one

formation
FORMS OF AMALGAMATION:
 A) Merger

X Ltd
XY Ltd
Y Ltd

 B) Acquisition

ABC Industries Ltd

ABC Industries Ltd

ABC Petrochemical
Ltd.
 Vendor company

The companies which are to be amalgamated ,absorbed i.e.

the companies which are going into liquidation after the sale

of their existing business is termed as vendor company. it is

also known as selling company or transferer company.

 Purchasing Company

The company purchasing or taking over the business is

termed as Purchasing company or transferee company.

 Purchase Consideration

It is the amount which is paid by purchasing company to the

selling company for taking over the business of selling

company .
METHODS OF CALCULATING PURCHASE
CONSIDERATION

 Lumpsum Method : Amount of Purchase consideration will be

stated .

 Net Asset Method

Purchase consideration = agreed value of assets taken over
–
agreed value of liabilities taken over
 Payment Method :
All the modes of payment will be added to arrive at the amount
of purchase consideration.
 TYPES OF AMALGAMATION
 Amalgamation in the nature of Merger
( Satisfies All 5 conditions)
➢ All the Assets and liabilities of transferer company become,
after amalgamation , the assets and liabilities of transferee
company.
➢ Atleast 90% shareholders of the transferor company should
continue as shareholders of transferee company by the virtue of
amalgamation
➢ Consideration must be paid through the issue of equity shares
only. In case of fractional shares ,fractional amount can be paid
in cash.
➢ The business of transferor company is intended to
be carried on by the transferee company after
amalgamation .

➢ No adjustment is intended to be made to the book

values of assets and liabilities of transferer
company , when they are incorporated in the
financial statement of transferee company
 Amalgamation in the nature of Purchase ( Does
not satisfy one or more conditions)
ACCOUNTS TO BE PREPARED IN THE BOOKS
OF SELLING COMPANY

 Realization Account

 Equity Shareholders Account

 Purchasing Company Account

 Asset or Liabilities account if it is not taken over

by purchasing company
THANK YOU