can someone pls tell me what is statutory reserve with a few examples (chapter amalgamation)
12 Replies
Faiz Ahmed
( Article Trainee)
(1731 Points)
Replied 06 November 2010
Statutory reserves means reserves(profit) appropriated for compliance of any law(statute).
For.e.g:- Sec117(c)(1) of Companies Act, says " A company must create debenture redemption reserve for redemption of debentures" . The amount is appropriated every year until such debentures are redeemed.
Clarification of above provision{117(c)(1)} is given by SEBI vide circular No. 9/2002 dated 18.4.2002
Another example could be reserve required to be maintained by banking companies @ 25% of net demand and time liabilities.
I assume that you know treatment of statutory reserves in amalgamation.
Hope you are clear.
Resham
(Carpe Diem !!!)
(6535 Points)
Replied 06 November 2010
As you are asking for amalgamation take care of these points also..
For amalgamation in nature of purchase
-- No reserves other than statutory reserves should be incorporated in the books of Purchasing company.
-- The statutory reserves are those reserves in the books of vendor company which are to be maintained by purchasing co. after amalgamation for certain number of years.
Entry--
Amalgamation adjustment a/c Dr.
To statutory reserves a/c
(reverse the entry when the assets are no longer required)
Various Statutory reserves --
Development Rebate Reserve
Investment Allowance Reserve
Export Profit Reserve
CA Lokesh Pokharna
(CA (Ahmedabad Bhilwara Chittorgarh))
(4128 Points)
Replied 06 November 2010
SIMPLE DEFINITION OF STATUTORY RESERVE: RESERVE WHICH IS CREATED / RETAINED DUE TO APPLICABILITY OF LAWS/ACTS
AND REGARDING AMAGAMATION: SEE
As you are asking for amalgamation take care of these points also..
For amalgamation in nature of purchase
-- No reserves other than statutory reserves should be incorporated in the books of Purchasing company.
-- The statutory reserves are those reserves in the books of vendor company which are to be maintained by purchasing co. after amalgamation for certain number of years.
Entry--
Amalgamation adjustment a/c Dr.
To statutory reserves a/c
(reverse the entry when the assets are no longer required)
Various Statutory reserves --
Development Rebate Reserve
Investment Allowance Reserve
Export Profit Reserve
ayushee dey
(CA Final Student)
(161 Points)
Replied 06 November 2010
Agree with Lokesh and Resham............and these statutory reserves are maintained for a minimum period of 4 years
SWEETY MITTAL
(CA)
(27 Points)
Replied 22 February 2012
statutory means required by law (statue) and reserves means appropriation of profit ,but there is a difference between simple reserve and statutory reserve i.e,statutory reserve will be made from profit &loss account while simple reserve made from profit & loss appropriation account.
Sheetal Jain
(Student)
(34 Points)
Replied 14 August 2012
Do "Employee profit sharing Account " comes under statutory Reserves ?
Can anyone clear my doubt as to why the above reserves is incorporated in the nature of Purchase Method ,Amalgamation.
Refer IPCC- Accounting Paper 1 - Vol. II of ICAI pg: 6.7 Question 4, Ch:Amalgamation
Melwin v Felix
(Lecturer )
(38 Points)
Replied 01 April 2014
Respected learned ones,
whether statutory reserves like development rebate reserve be trasferred to equity shareholders account or not in amalgamation.
hema
(Student CA IPC / IPCC)
(22 Points)
Replied 29 July 2015
statutory reserves should be maintained for a specific period of 4 yrs after such expiry of period where these statutory reserves are transfered to?
lalit pahuja
(student)
(25 Points)
Replied 10 July 2016
Can someone help to understand whether 'Retirement Gratuity Fund' considered as Statutory Reserve for amalgamation?
Sushant Arya
(7 Points)
Replied 20 April 2017
few examples are: Amalg.
Investment allowance reserve
Export profit reserve
Foreign project reserve
Shipping reserve
Tea development allowance
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