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Amalgamation

Arun Kumar (Article Assistant) (110 Points)

13 April 2010

Can any one tell me the when we calculate the purchase consideration then assets are taken at agreed values if given otherwise book values but i didnt understand that in some question debetures are taken in current liabilities & in some question it is not taken so can anyone tell me when it is taken & not taken

plz help me

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6 Replies

Santhosh Poojary (SIEMPRE AHÍ PARA TI) (15607 Points)
Replied 13 April 2010

If Transferee( Buying) Company Taking over (purchasing ) the Debentures of Trasferor (selling) company along with other Liabilities then only Debentures will include in Purchase Consideration otherwsie not...

hope u got the point..revert back for Further Query.

Regards

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Arun Kumar (Article Assistant) (110 Points)
Replied 14 April 2010

A Ltd takes over B Ltd on 10-04-2002. the P.C. is discharged by as follows:

(i) Issued 350000 equity shares of Rs.10 each at par with the equity shareholders of B Ltd.

(ii) Issued 15% Preference shares of Rs. 100 each to discharge the preference shareholders of B Ltd. (Rs. 17,00,000 in B/S as on 31.3.2002 )at 10% premium.

(iii) the debentures holders of B Ltd will be converted into equivalent number of debentures of A Ltd.

then P.C. is calculated as follows;

equity shareholders of B Ltd. 35,00,000

preference shareholders of B Ltd. 18, 70,000

total 53,70,000

debentures are not considered y??????

plz help

Santhosh Poojary (SIEMPRE AHÍ PARA TI) (15607 Points)
Replied 15 April 2010

Dear Arun

ACCORDING TO AS 14...Purchase Consideration should be paid only to Shareholders of the Transferor (selling) company.

Pucharse Consideration Cannot Paid to Outsiders i.e Debenture holder,creditors etc.

So Payment Made to Debenture Holders cannot included in PC Calculation in Lumpsum payment method

But if u r Calculating PC By NET ASSET Method..Then amount of Debentures ( if its Taken over by Transferee comapany) will be taken into account to find out the amount of Net Asset. i.e ( Asset - Liabilities).

SO IN UR CASE AMOUNT OF DEBENTURE CANNOT BE CONSIDERED IN PC.

Regards