Advanced Corporate Accounting Mergers & Acquisitions

As per AS -14,

Amalgamation is of 2 types, namely,

• Amalgamation in the nature of Merger

• Amalgamation in the nature of Purchase

There are 2 methods of Accounting Treatment

• Pooling of interest method

• Purchase method

Step: 1 – Transfer of Assets to Realization A/c

Realization A/c Dr
To Various Assets A/c
Note:
1. Transfer all the assets – whether taken over or not
2. Cash & Bank – Transfer only when it is taken-over
3. Transfer at Book-Value only

Step: 2 – Transfer of Liabilities to Realization A/c

Various liabilities A/c Dr
To Realization A/c
Note:
1. Transfer all the outsider’s liabilities – whether taken-over or not
2. Transfer at book-value only

Step: 3 – Purchase Consideration Due

Transferee Company A/c Dr
To Realization A/c
Note: Amount shall be PC Amount

Step: 4 – Receipt of Purchase Consideration

Cash A/c Dr
Securities in Transferee Co. A/c Dr
To Transferee Company
Note: Amount shall be PC Amount & Discharge mode

Step: 5 – Realization of Assets not taken-over

Bank A/c Dr
To Realization A/c
Note: Amount shall be the amount obtained on account of realization of the asset

Step: 6 – Payment of Liabilities not taken-over

Realization A/c Dr
To Bank A/c
Note: Amount shall be the amount paid to discharge the liability

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Advanced Corporate Accounting Mergers & Acquisitions

Step: 7 – Settlement of P. Shareholders

Due Entry Payment Entry
• If settled at Par

P. Share Capital A/c Dr

To P. Shareholders A/c

• If settled at a Premium

P. Share Capital A/c Dr

Realization A/c Dr P. Shareholders A/c Dr
To P. Shareholders A/c To Cash/Bank A/c
To Securities in Transferee Co. A/c

• If settled at a Discount

P. Share Capital A/c Dr

To P. Shareholders A/c
To Realization A/c

Step: 8 – Payment of Realization Expenses

Realization A/c Dr
To Cash/Bank A/c
Note: Amount shall be the actual realization expense

Step: 9 – Closure of Realization A/c

In case of Realization Profits In case of Realization Losses
(Cr balance > Dr balance) (Dr balance > Cr balance)
Realization A/c Dr E. Shareholders A/c Dr
To E. Shareholders A/c To Realization A/c

Step: 10 – Transfer of Accumulated profits

Profit & Loss A/c Dr
General Reserve A/c Dr
Reserve Fund A/c Dr
Capital Reserve A/c Dr
To E. Shareholders A/c

Step: 11 – Transfer of Accumulated losses

E. Shareholders A/c Dr
To Profit & Loss A/c
To Preliminary Expenses A/c
To Discount on issue of Shares A/c
To Deferred Revenue Expenses A/c

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Advanced Corporate Accounting Mergers & Acquisitions

Step: 12 – Transfer of E. Share Capital

E. Share Capital A/c Dr
To E. Shareholders A/c

Step: 13 – Final Settlement to E. Shareholders

E. Shareholders A/c Dr
To Cash/Bank A/c
To Securities in Transferee Co. A/c

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