1. Transfer of Assets and Liabilities
⋅ Nature of Merger: There is transfer of all assets & liabilities.
⋅ Nature of Purchase: There need not be transfer for all assets & liabilities.
2. Equity Shareholder’s holding 90%
⋅ Nature of Merger: Equity shareholders holding 90% equity shares in transferor company become shareholders of transferee company.
⋅ Nature of Purchase: Equity shareholders need not become shareholders of transferee company.
3. Purchase Consideration
⋅ Nature of Merger: Purchase consideration is discharged wholly by issue of equity shares (except cash for fractional shares)⋅ Nature of Purchase: Purchase consideration need not be discharged wholly by issue of equity shares.
4. Same Business
⋅ Nature of Merger: The same business of the transferor company is intended to be carried on by the transferee company.
⋅ Nature of Purchase: The business of the transferor company need not be intended to be carried on by the transferee company.
5. Recording of Assets & Liabilities
⋅ Nature of Merger: The assets & liabilities taken over are recorded at their existing carrying amounts except where adjustment is required to ensure uniformity of accounting policies.
⋅ Nature of Purchase: The assets & liabilities taken over are recorded at their existing carrying amounts or the basis of their fair values.
6. Recording of Reserves of Transferor Co.
⋅ Nature of Merger: All reserves are recorded at their existing carrying amounts and in the same form.
⋅ Nature of Purchase: Only statutory reserves are recorded at their existing carrying amounts.
7. Recording of Balance of Profit & Loss A/c of Transferor
⋅ Nature of Merger: The balance of P&L A/c should be aggregated with the corresponding balance of the transferee co. or transferred to the General.
⋅ Nature of Purchase: The balance of P&L A/c losses its identity and is not recorded at all.