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Advanced accounting - Statutory reserves treatment in amalgamation

In nature of purchase we create a imaginary ac Amalgamation adj ac for incorporating statutory reserves! But we cant we create it out of free reserves? Becoz if we have to ise those reserves for something we wont have anything in hand and also if we reverse it when not needed it will just go back to free reserves! Why cant we do this?


Saran Vadivel

Saran Vadivel

CA Inter

2K+

21-Jun-20 17:21

33

Answers (1)

Best Answer

The acquiring company may choose to write off the Amalgamation adjustment account against free reserves. Also note that the amount as stated in Stated in Statutory Reserves should be retained.


Suraj Lakhotia

Suraj Lakhotia

Admin

22-Jun-20 16:09

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