Differentiate between 'net assets method' and 'net payment method' of computation of purchase consideration for accounting for amalgamation.
CS Executive · Company Accounts & Auditing Practices · PYQS · June 2015
Differentiate between 'net assets method' and 'net payment method' of computation of purchase consideration for accounting for amalgamation.
Answer & Explanation:
Net Assets Method: The amount of consideration or the amount of net assets is ascertained by deducting the total of liabilities taken over (at their agreed values, if any) from the total value of assets taken over (at their re-valued figures, if any). Net Payment Method: The amount of consideration under this method is ascertained by adding up the total value of shares and other securities issued and the payments made in the form of cash and other assets by the transferee company to the transferor company in discharge of consideration.
Topics: Amalgamation
Related Questions in this Topic
- Distinguish between amalgamation in the nature of merger and amalgamation in the nature of purchase.
- The following are the summarised Balance Sheets of X Ltd. and Y Ltd. as at 31-03-2016: Particulars X Ltd. (₹) Y Lt...
- Explain the conditions for an amalgamation in the nature of merger.
- Rose Ltd. is taking over entire business of Lily Ltd. on the basis of following balance sheets as at 31st March, 2014: ...
- Under what circumstances, an amalgamation is classified as an 'amalgamation in the nature of merger'?