Accounting Standard-14 Accounting For Amalgamation (Key Points)

1).The Accounting Standard is applicable only where it is made in pursuant to a scheme sanctioned by statute.

2).The accounting method to be adopted depends whether the amalgamation is in the nature of merger or not as

defined in para 3(e) of the Standard. The definitions list out five criteria, all of which must be satisfied for an

amalgamation to be accounted on the basis of "Pooling of Interest Method".

3). If any criterion is not met then the amalgamation is accounted on by using "Purchase Method".

4).It may be mentioned that these criteria relates to mode of payment of consideration of merger, shareholding pattern pre and Post Merger, intention to carry-on business after the merger, pooling of all assets and liabilities after the merger and an intention to continue to carry the carrying amounts of assets and liability after the merger.

5).Under Purchase Method, all assets and liabilities of the transferor company is recorded either at existing

carrying amount or consideration is allocated to individual identifiable assets and liabilities on basis of its fair

values at date of amalgamation. The excess or shortfall of consideration over value of net assets is recognised

as goodwill or capital reserve.

6).Under the Pooling of Interest Method, assets, liabilities and reserves of the transferor company be recorded at

existing carrying amount and in the same form as on date of amalgamation. In case of conflicting accounting

policies existing in transferor and transferee company a uniform policy be adopted on amalgamation, as per

AS-5.

7).Certain specific disclosures are required to be made in financial statements after amalgamation. In case of amalgamation effected after Balance Sheet date but before issue of financial statements of either party, the event be only specifically disclosed and not given effect in such statements.