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Amalgamation Adjustment Reserve Account is Required in Respect of PDF

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Amalgamation Adjustment Reserve Account is Required in Respect of
PDF Name Amalgamation Adjustment Reserve Account is Required in Respect of PDF
No. of Pages 16
PDF Size 0.21 MB
Language English
CategoryEnglish
Source mca.gov.in
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Amalgamation Adjustment Reserve Account is Required in Respect of

Hello guys, we are going to present Amalgamation Adjustment Reserve Account is Required in Respect of PDF. Amalgamation means an amalgamation in accordance with the provisions of the Companies Act, 2013 or any other statute which may be applicable to companies and includes ‘merger’. A transferor company means a company which has been merged with another company.

The amalgamation adjustment reserve account appears as a debit balance (negative figure) in the balance sheet under the head “Reserves and Surplus”. When the identity of the fiat reserves is not required to be maintained, both the reserve and the aforesaid account should be reversed.

Amalgamation Adjustment Reserve Account is Required in Respect of PDF – Highlights

  • If the merger is ‘in the nature of amalgamation’, the identity of the reserves is retained and they appear in the financial statements of the transferor company as they appear in the financial statements of the transferor company. Thus, for example, the General Reserve of the Assigning Company becomes the General Reserve of the Assigning Company, the Capital Reserve of the Assignee Company becomes the Capital Reserve of the Assignee Company, and that of the Assignee Company. The revaluation reserve becomes the company’s revaluation reserve. Assignee Company. Assignee Company. As a result of maintaining the identity, the reserves available to be distributed as dividends before the merger will also be available to be distributed as dividends after the merger. The difference between the amount recorded as issued share capital (plus any additional consideration in the form of cash or other assets) and the amount of share capital of the transferor company is adjusted against reserves in the financial statements of the transferee company. ,
  • If the merger is ‘merger in the nature of purchase’, the identity of stores other than the legal stores referred to in paragraph 18 is not protected. The amount of consideration earned by the transferee company is deducted from the value of the net assets of the transferee company. If the result of the calculation is negative, the difference is charged to goodwill arising from the merger and settled in the manner established in paragraphs 19-20. If the result of the calculation is positive, the difference is credited to the Capital Reserve.
  • Some reserves may have been created by the transferor company in accordance with the requirements of the Income-tax Act of 1961 or for availing benefits; For example, Growth Allocation Reserve or Investment Allocation Reserve. The law requires that the identity of the reserves be kept for a certain period. Similarly, in the context of the requirements of other statutes, certain other reserves may have been created in the financial statements of the transferring company.
  • Generally, however, in a merger in the nature of the purchase, the identity of the reserves is not preserved, an exception is made with respect to reserves of the above nature (hereinafter referred to as “legal reserves”), and such Reserves they retain their identity in the financial statements of the transferee company in the form in which they appear in the financial statements of the transferor company, as long as their identity is required to comply with applicable law.
  • This exception is made only in those mergers in which the requirements of the corresponding law are met to record the statutory reserves in the books of the transferee company. In such cases, the statutory reserves are recorded in the financial statements of the transferee company under the charge of an appropriate head of account (for example, ‘Merger Adjustment Reserves’), which is presented as a separate line item. When it is no longer required to maintain the identity of the fiduciary reserves, both the reserve and the previous accounts are reversed.

Treatment of Reserves Specified in A Scheme of Amalgamation

An approved merger arrangement in accordance with the provisions of the Companies Act 1956 or any other law may prescribe the treatment that should be given to the reserves of the transferor company after its merger. When treatment is prescribed as such, it is followed. In some cases, a merger plan enacted under the statute may prescribe a different treatment for the transferor company’s reserves after the merger than the requirements of this Standard, which would have been followed if the plan had not prescribed treatment.

The Ministry of Corporate Affairs, Government of India vide notice dated March 30, 2016, inserted a footnote in this paragraph that “paragraph 23 shall not apply to any merger scheme approved under the Companies Act, 2013”, which is relevant to those companies Which follows the Companies (Accounting Standards) Rules, 2006. This footnote has not been added to the 2016 revised standard by ICAI for entities other than companies (see Declaration XLV).

In such cases, the following disclosures are made in the first post-merger financial statements:

  • A description of the accounting treatment granted to stores and the reasons they have followed a treatment other than the one set forth in this Standard.
  • Deviations in the accounting treatment given to reserves determined by a statute-approved merger plan compared to the requirements of this standard, which would have been followed if the plan had not prescribed any treatment.
  • Economic impact, if any, arising out of such deviation.

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