Under the net payment method, consideration is calculated by adding the cash paid, agreed value of assets given, and agreed value of securities allotted by the transferee company to the transferor company. The document provides an example, where P Ltd takes over S Ltd and agrees to give 10 preference shares worth Rs. 10 each for every preference share in S Ltd, and Rs. 1 in cash plus 1 equity share worth Rs. 15 for every equity share in S Ltd. The total consideration is calculated as Rs. 20 lakh for preference shares, Rs. 1.2 crore for equity shares allotted, and Rs. 0.8 lakh for cash, amounting to Rs. 1.48 crore.

1. Net payment Method
Under this method , consideration is ascertained by
adding up the cash paid , agreed value of assets given
and the agreed values of securities allotted by the
transferee company to the transferor company in
discharge of consideration.

2. Lets consider the following balance sheet of S Ltd. Suppose P Ltd. Takes over
the business of S Ltd. And agrees to give for each 11% preference share in S
Ltd. ten 12% preference shares of Rs.10 fully paid up at par and for each
equity share in S Ltd. Re. 1 in cash and one fully paid equity share in P Ltd. Of
Rs.10 valued at Rs.15. The consideration will be completed as follows:
Liabilities Assets
Share Capital:
20,000 11% Preference Shares
20,00,000
of Rs.100 each, fully paid up
80,00,000
8,00,000 Equity Share
50,00,000
Of Rs. 10 each, fully paid up
60,00,000
Reserves
Sundry Liabilities
Sundry Assets 2,10,00,000
2,10,00,000 2,10,00,000

3. Rs.
12% preference shares to be allowed by P Ltd.
=Rs.10 x 20,000 x 10 20,00,000
Equity shares to be allotted by P Ltd.
= Rs. 15 x 8,00,000 1,20,00,000
Cash to be paid by P Ltd.
= Rs. 1 x 8,00,000 8,00,000
CONSIDERATION 1,48,00,000