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Amalgamation -merger

SHABAB KARIMPANAKKAL (32 Points)

13 June 2021

when paid up capital less than purchase consideration

should the difference be adjusted in P&L or capital reserve?

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4 Replies

yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 13 June 2021

Negative goodwill arises here. It should be capitalised.

When positive good will arises, it should be expensed.

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CA. Sourav Sarkar (Chartered Accountant ) (24583 Points)
Replied 13 June 2021

If it is in negative then it should be capital reserve otherwise it will be treated as goodwill

yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 13 June 2021

Hi, in my above statement, positive statement must be taken to profit and loss (credit). Sry about that. This is for IndAS. Coming to AS standards If the result of the computation of goodwill is negative, the difference is debited to goodwill arising on amalgamation and dealt with in the manner stated in paragraphs 19-20. If the result of the computation is positive, the difference is credited to Capital Reserve.

yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 13 June 2021

What is paid up capital? Ok you meant subsidiary capital. If you paid more cash than that, Then it is positive goodwill. Fine negative goodwill means a bargain purchase which is taken to capital reserves. Remember that as it might be a useful interview question. I guess AS doesn’t have NCI? Follow that up as well.