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Amalgamation - Realisation Ac
Accountancy
In all the illustrations we have transferred liabilities to Realisation ac and reserves to equity shareholders ac. But incase of mergers even the reserves are taken over by purchasing company! So can we take the reserves to Realisation A/c itself? And by that approach I guess we can arrive at how much profits had equity shareholders made actually! Is this approach right?
Answers (3)
Primarily reserves belong to shareholders, and hence they cannot be taken into realisation account. Explaining further, the identity of the reserves is preserved in case of amalgamation in the nature of merger, as the reserves of transferor company would appear as it is in the balance sheet of transferee company. As it appears in the Financials of the Transferee company you cannot take it to realisation account.
ruchi lahoti
Primarily reserves belong to shareholders, and hence they cannot be taken into realisation account. Explaining further, the identity of the reserves is preserved in case of amalgamation in the nature of merger, as the reserves of transferor company would appear as it is in the balance sheet of transferee company. As it appears in the Financials of the Transferee company you cannot take it to realisation account.
In case of assets and liabilities that are transferred we put it in realisation ac and they are shown in Transferree co. Balance sheet!! Same way when reserves and surplus are transferred they can be put in realisation ac right? Though it belongs to shareholders now they are gonna form part of transferree co just like assets and liabilities and the purchase consideration paid would either result in profits or losses for equity shareholders ultimately!! So?
Thread Starter
Saran VadivelIn case of assets and liabilities that are transferred we put it in realisation ac and they are shown in Transferree co. Balance sheet!! Same way when reserves and surplus are transferred they can be put in realisation ac right? Though it belongs to shareholders now they are gonna form part of transferree co just like assets and liabilities and the purchase consideration paid would either result in profits or losses for equity shareholders ultimately!! So?
Reserves can never be taken into realisation account, be it in the nature of merger or purchase
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