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

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