Accounting Standard (AS) 14
Accounting for Amalgamations Contents
INTRODUCTION Definitions EXPLANATION Types of Amalgamations Methods of Accounting for Amalgamations The Pooling of Interests Method The Purchase Method Consideration Treatment of Reserves on Amalgamation Treatment of Goodwill Arising on Amalgamation Balance of Profit and Loss Account Treatment of Reserves Specified in A Scheme of Amalgamation Disclosure Amalgamation after the Balance Sheet Date ACCOUNTING STANDARD The Pooling of Interests Method The Purchase Method Paragraphs 1-3 3 4-27 4-6 7-13 10-11 12-13 14-15 16-18 19-20 21-22 23 24-26 27 28-46 33-35 36-39 Continued../..
Common Procedures Treatment of Reserves Specified in A Scheme of Amalgamation Disclosure Amalgamation after the Balance Sheet Date
40-41 42 43-45 46
The following Accounting Standards Interpretation (ASI) relates to AS 14 also, although it was issued in the context of AS 22, ‘Accounting for Taxes on Income’:
ASI 11 - Accounting for Taxes on Income in case of an Amalgamation
The above Interpretation is published elsewhere in this Compendium.
180 AS 14 (issued 1994)
Accounting Standard (AS) 14*
Accounting for Amalgamations
(This Accounting Standard includes paragraphs 28-46 set in bold italic type and paragraphs 1-27 set in plain type, which have equal authority. Paragraphs in bold italic type indicate the main principles. This Accounting Standard should be read in the context of the Preface to the Statements of Accounting Standards 1 .) The following is the text of Accounting Standard (AS) 14, ‘Accounting for Amalgamations’, issued by the Council of the Institute of Chartered Accountants of India. This standard will come into effect in respect of accounting periods commencing on or after 1.4.1995 and will be mandatory in nature.2 The Guidance Note on Accounting Treatment of Reserves in Amalgamations issued by the Institute in 1983 will stand withdrawn from the aforesaid date.
1. This statement deals with accounting for amalgamations and the treatment of any resultant goodwill or reserves. This statement is directed principally to companies although some of its requirements also apply to financial statements of other enterprises. 2. This statement does not deal with cases of acquisitions which arise when there is a purchase by one company (referred to as the acquiring * A limited revision to this Standard has been made in 2004, pursuant to which paragraphs 23 and 42 of this Standard have been revised (see footnotes 4 and 8). 1 Attention is specifically drawn to paragraph 4.3 of the Preface, according to which Accounting Standards are intended to apply only to items which are material. Reference may be made to the section titled ‘Announcements of the Council regarding status of various documents issued by the Institute of Chartered Accountants of India’ appearing at the beginning of this Compendium for a detailed discussion on the implications of the mandatory status of an accounting standard. 2
Accounting for Am algam ations 201
company) of the whole or part of the shares, or the whole or part of the assets, of another company (referred to as the acquired company) in consideration for payment in cash or by issue of shares or other securities in the acquiring company or partly in one form and partly in the other. The distinguishing feature of an acquisition is that the acquired company is not dissolved and its separate entity continues to exist.
3. The following terms are used in this statement with the meanings specified: (a) Amalgamation means an amalgamation pursuant to the provisions of the Companies Act, 1956 or any other statute which may be applicable to companies. (b) Transferor company means the company which is amalgamated into another company. (c) Transferee company means the company into which a transferor company is amalgamated. (d) Reserve means the portion of...