The document discusses amalgamation, absorption, and external reconstruction of companies, detailing their definitions and characteristics. It compares the pooling of interest method and the purchase method of accounting, highlighting differences in how assets and liabilities are recorded during mergers. Additionally, it outlines how to calculate purchase consideration in mergers.

1. AMALGAMATION
PRESENTED BY:-
D R . J Y O T I K H A R E
A S S O C I AT E P R O F E S S O R
G O V T. P. G . C O L L E G E
M A L D E V TA , R A I P U R
D E H R A D U N

2. MEANING OF AMALGAMATION

3. AMALGAMATION

4. AMALGAMATION, ABSORPTION AND
RECONSTRUCTION
• Amalgamation—two or more company joining to make a new company
A. ltd + B. ltd (VENDER CO.) = AB ltd (PURCHASING CO.)
• Absorption – one or more companies taken over by an existing company.
A ltd (VENDER CO,)-----takenover by B. Ltd (PURCHASING COMPANY)
• External reconstruction—one and one loss company taken over by new company
AB Ltd co.(Old company,VENDER CO.)---------------------AB Ltd Co.(New company, PURCHASING CO.)

5. CHARACTERISTICS OF
AMALGAMATION

6. BENEFITS OF AMALGAMATION

8. TYPES OF AMALGAMATION

9. DIFFERENCE BETWEEN MERGER AND
PURCHASE METHOD
BASIS FOR COMPARISON POOLING OF INTEREST METHOD PURCHASE METHOD
Meaning Pooling of Interest Method of accounting is
one in which the assets, liabilities and reserves
are combined and shown at their historical
values, as of the date of amalgamation.
Purchase Method, is an accounting method,
wherein the assets and liabilities of the
transferor company are shown at their market
value in the books of the transferee company,
as of the date of amalgamation.
Applicability Merger Acquisition
Assets and liabilities Appear at book values. Appear at fair market values.
Recording All the assets and liabilities of the companies
undergoing merger are aggregated.
Only those assets and liabilities are recorded
in the books of transferee company, which are
taken over by it.
Reserves The identity of transferor company's reserves
is kept intact.
The identity of the transferor company's
reserves except statutory reserves is not kept
intact.
Purchase Consideration Difference in the amount of puchase
consideration and share capital is adjusted
with reserves.
Surplus or deficit of purchase considertaion
over the net asset acquired, should be
credited or debited, as capital reserves or
goodwill.

10. HOW TO CALCULATE PURCHASE
CONSIDERATION?

11. HOW TO CALCULATE PURCHASE
CONSIDERATION?

12. PURCHSE COSIDERATION
• Assets taken over (at agreed value)
non- current assets xxx
current assets xxx
(-) liabilities taken over(at agreed value)
non- current liabilities xxx
current liabilities xxx
Net Assets xxxxxx
(+/-) Goodwill/ capital reserve xxxxxxxx
Discharge of PC
Equity shares of new co.
Pref. shares of new co.
Debentures of new co.
cash

13. THANKYOU