Merger Lecture Notes

Type -> Asset Combining -> Tax Advantages from Govt. Merger -> Purchase Consideration (a) Find PP (b) Had we paid only in Cash to Acquiring Co. (c) Shares & Cash (d) No Revaluation Tax Advantages -> ICAI -> Issues Accounting Standards -> AS-14 -> No Revaluation -> 5 Conditions * If Question asks for merger even if there 5 conditions not satisfied then also in exam, we have to do it as per laid down rules/merger method (a) 75% of Est. Net Assets of Acquiring Co. (b) Payment in Shares (c) No Revaluation (d) Same Business (e) Each share should be valued as per laid down rules. **Note:** * Cash sunk for transaction can be given as consideration. * Shares issued for transaction can be given as consideration. * If Question asks for merger even if there 5 conditions not satisfied then also in exam, we have to do it as per laid down rules/merger method. (a) 75% of Est. Net Assets of Acquiring Co. (b) Payment in Shares (c) No Revaluation (d) Same Business (e) Each share should be valued as per laid down rules. Equity share holder of new Company: i) Such equity shareholders shares should be paid in form of equity shares only except Cash paid for fraction. ii) All assets and All liab. should be taken by new Company. iii) Such asset / liab. should be taken over at Book value of old Co. iv) New Company should continue Same old business of old company. v) In case of merger then tax benefit. In case of purchase then tax. (iv) Payment of exp PL/GR A/c Dr. To Cash [Being exp paid] (v) Clossen of Statutory Reserve - No entry (vi) Unrealised profit on stock Dr. To P&L A/c Cr. [Being unrealised profit transferred] Note: Entry for Contra & payment for liab remain Same Note:- Merger has no effect on Books of old Co. conduct. Calculation of P/E. Note:- If question mentions merger, then Merger method has to be applied, even if Condition of Merger are not satisfied. Note:- following Conditions to be satisfied for merger & All Conditions to be satisfied:- Conditions:- (i) Equity shareholder holding at least 90% of face value of equity share should agree to become Merger / Pooling of interest method. In case of merger following entries are required by new Company. (i) Buisness merger Alc Dr PC // To Lig. of old Co. P.C. [Being Business merged] (ii) Sundry assets Aic A Dr. (Book value) Reserve & Surplus (B.I.F) To Sunday Lieb (Bok value) To Business merger P.C. To reserve & surplus ofg Old Co. [Being S. Asset & liab & Reserve - recorded in. G.R. /pec AIC (iii) Liq. Alc Dr To ES.H AIC To S./P Alc To Cash Alc To PSC. AIC [Being P.C. pard]