04 November 2013
net asset method is generally applied when some selected assets are taken over & for which purchase consideration has to be paid.
Whereas in merger,apart from other conditions to be satisfied one important condition is that "all the assets & liabilities should be transferred at book value only"
05 November 2013
There are in general two methods,
NET Payment Method and Net Asset Method.. Whereas Merger isn't any method, its the way of amalgamation...
(a) Payment method, it is calculated on the basis of payments made to various claimants of vendor company. Total of all such payments made to various claimants of the vendor company will be the purchase consideration. Purchase consideration will include only such amount which has been paid to vendor company. If any liability is paid by the purchasing company after taken over, such payment will not be included in purchase consideration.
(b) Net asset method, it is calculated on the basis of net assets taken over by the purchasing company. Various assets taken over at the agreed value by the purchasing company are added. Out of this value of assets, value of liabilities taken over by purchasing company are deducted. The net value arrived at is the purchase consideration. If any amount is paid for goodwill it will be added to the net assets to arrive at the purchase consideration.
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