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Calcualtion of reserve

342 views 7 replies

Shirin Shaikh

Student

28 Points Joined February 2013

wil u plz explain why there is difference in calculating reserves under merger and purchase method?

Replies (7)

Guest

In merger, all reserves are carried over by transferee entity. And in purchase method, only statutory reserves are carried forward in books of trasferee entity.

Shirin Shaikh

Student

28 Points Joined February 2013

Ya its right n thnk u..bt why in merger pc compared against paid up capital and in purchase method against net assets..

Shirin Shaikh

Student

28 Points Joined February 2013

Ya its right n thnk u..bt why in merger pc compared against paid up capital and in purchase method against net assets..

Guest

Because in merger. Only share capital is changed. Rest items of bal sheet remain same. Therefore old and new share capital is compared and difference is adjusted in reserves.

Guest

And in purchase. Not everything is bought or sold. Thats why cost of assets acquired and pc is compared. Same as you buy something from market cheaper or more and pay money. Then you will compare payment with cost of item, how much cheaper or expensive you get.

Guest

Expensive means goodwill. Cheaper means capital reserve.