Core concepts
- 01Amalgamation: merging of two or more companies into one.
- 02Two types: amalgamation in nature of merger and in nature of purchase.
- 03Pooling of interests method (merger) — books combined at carrying amounts.
- 04Purchase method — purchase consideration over net assets = goodwill.
- 055 conditions for merger (Para 3(e)): all assets/liab taken, ≥90% shareholders, consideration in shares, business continued, same accounting policies.
Flowchart summary
Amalgamation | +-- Nature of Merger --> Pooling of Interests | (5 conditions met) | +-- Nature of Purchase --> Purchase Method | v Goodwill / Capital Reserve
Exam-critical pointers
- ⭐Purchase consideration excludes payments to debenture-holders & creditors.
- ⭐Intrinsic value, Net Payment, Net Asset methods to compute PC.
- ⭐Statutory reserves of transferor preserved via Amalgamation Adjustment Account (purchase method).
- ⭐Differentiate amalgamation from absorption / external reconstruction.
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