Department of Commerce | Shri Umiya Kanya Mahavidyalaya

*B.Com. Second Year*

*Corporate Accounting*

Sunil Kumar Gupta

*Amalgamation of Companies*

*Points to keep in mind while solving problems related to the amalgamation of companies*

Under the nature of merger of companies, the transferor company transfers all its assets and liabilities to the transferee company.

Therefore, in such a situation, if the purchase consideration is not given, then all liabilities (excluding capital) should be deducted from the sum of all the assets of the transferor company.

This will give the purchase consideration.

However, if the amalgamation of companies is in the nature of a purchase, then in such a situation, only external liabilities should be deducted from the actual assets.

And the purchase consideration should be calculated.

However, it should be noted that even if you are asked to solve the problem using either method, but if there is an instruction to calculate the purchase consideration using the net asset valuation method, then only external liabilities should be deducted from the assets.

Purchase Consideration (Merger Method) =

Sum of Total Assets

(-) All Liabilities

-------------------------------

Purchase Consideration (Purchase Method) =

Sum of Total Assets

(-) External Liabilities

----------------------------------