••• Treatment of Goodwill on amalgamation:
Goodwill shall be written off over a period of 5 years unless justified for longer period.
••• Balance of Profit and Loss account:
In case of merger balance is aggregated with corresponding balance in transferee company.
In case of purchase it loses its identity.
Goodwill shall be written off over a period of 5 years unless justified for longer period.
••• Balance of Profit and Loss account:
In case of merger balance is aggregated with corresponding balance in transferee company.
In case of purchase it loses its identity.
••• When the transferee company holds some shares in transferor company the purchase consideration is amount payable to outside sundry shareholders.
••• When transferor company holds some shares in transferee company the number of shares to be issued by transferee company under the scheme of amalgamation shall be reduced by no of shares held by transferor company.
••• When both the companies are holding in both of the shares the above two points shall be effected.
••• In case of fraction of shares there will be cash settlement.
••• In case the two companies are merged into another third company which becomes holding company then while showing the balance sheet of holding company we have to be careful as all assets and liabilities will not be amalgamated into C Ltd. Show the share capital issued to Transferee Company on liabilities side and show as investments on the assets side.
••• When holding company takes over subsidiary company it is merger whereas if subsidiary company takes over holding company it is reverse merger.
••• If exchange ratio is not given in the problem then we have to find out by simultaneous equation method.
••• Goodwill or capital reserve will arrive only if goodwill is there in valuation of net assets.
••• Replacement value is always the highest and realizable value is least.
••• In case of Reconstruction, we open capital reduction account and transfer all gains and reduction of loans and creditors, shares claims and then transfer of opposite entry of losses brought forward and balance shall be transferred to capital reserve account if any.