SHANKAR
Content
MERGERS, ACQUISTIONS AND RESTRUTURING
Purchase method Under the purchase method, the acquirer writes up the target firm assets from their book value to current market value and records them on its balance sheet. The difference between the purchase price and the fair market value of the target's net assets is recognized on the balance sheet as goodwill. The asset and liabilities of the merged company are presented at their market values as on the date of acquisition, in order to ensure that the resulting values of the accounting process are able to reflect the market values.
(AIMIT)
MERGERS,
ISTI
S
RESTRUTURI G
Under the pooling of interests method, the assets and liabilities of both companies are simpl added together at their historical cost book values
Compared with the pooling method, the purchase method results in higher book values of assets. This, in turn, increases depreciation and goodwill amortization ,and lowers reported income.
One of the drawbacks with purchase method is the chance that it ma overrate
depreciation charges. because the book value of assets used in accounting is generall lower than the fair value if there is inflation in the econom
(AIMIT)
MERGERS, ACQUISTIONS AND RESTRUTURING
Procedure The assets and liabilities of the transferor compan should be incorporated in the transferee compan financial statements in either wa s.
Purchase consideration under purchase method is to be valued at the market price of shares issued b Transferee Compan . At the existing tall ing amounts of purchase consideration should be allocated identifiable assets and liabilities on the basis of fair value. On the date of amalgamation. An excess of the purchase consideration over the value of assets should be recognized as goodwill on the other had if purchase consideration is less than the net value of assets acquired. Difference should treat as capital reserves.
Thank ou«««
(AIMIT)
Purchase method Under the purchase method, the acquirer writes up the target firm assets from their book value to current market value and records them on its balance sheet. The difference between the purchase price and the fair market value of the target's net assets is recognized on the balance sheet as goodwill. The asset and liabilities of the merged company are presented at their market values as on the date of acquisition, in order to ensure that the resulting values of the accounting process are able to reflect the market values.
(AIMIT)
MERGERS,
ISTI
S
RESTRUTURI G
Under the pooling of interests method, the assets and liabilities of both companies are simpl added together at their historical cost book values
Compared with the pooling method, the purchase method results in higher book values of assets. This, in turn, increases depreciation and goodwill amortization ,and lowers reported income.
One of the drawbacks with purchase method is the chance that it ma overrate
depreciation charges. because the book value of assets used in accounting is generall lower than the fair value if there is inflation in the econom
(AIMIT)
MERGERS, ACQUISTIONS AND RESTRUTURING
Procedure The assets and liabilities of the transferor compan should be incorporated in the transferee compan financial statements in either wa s.
Purchase consideration under purchase method is to be valued at the market price of shares issued b Transferee Compan . At the existing tall ing amounts of purchase consideration should be allocated identifiable assets and liabilities on the basis of fair value. On the date of amalgamation. An excess of the purchase consideration over the value of assets should be recognized as goodwill on the other had if purchase consideration is less than the net value of assets acquired. Difference should treat as capital reserves.
Thank ou«««
(AIMIT)
