Advanced Accounting

Sai Geethika

If it satisfies the following all 5 conditions then it is said to be in nature of merger 1.All assets and liabilities of transferor company become after amalgamation the assets and liabilities of transferee company 2 Share holders holding not less than 90% of face value of equity shares of transferor company becomes equity shareholders of transferee company 3.the consideration receivable by those equity shareholders of transferor company who agree to become equity shareholders of transferee company is discharged by transferee company wholly by issue of equity shares 4. The business of transferor company is intended to be carried on after the amalgamation by the transferee company 5. No adjustment is made to book values of assets and liabilities of transferor company when they are incorporated in transferee company books If any one of the above condition is not satisfied then it is in nature of purchase.