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Amalgamtion
Accountancy
Why amalgamation in the nature of purchase-agreed upon value and in the nature of merger-book value during valuation?
Answers (3)
Muhammed Salih
hi, i'm not sure about this, but my view on this is that all the concepts we learning in chapter amalgamation is as per "AS 14 Accounting for Amalgamation" and the AS are issued by MCA. In the AS 14 we treat that in the way said by the AS.
Hi, thank u, I found it. Agreed upon value -at what value we are agreed to taken over & for net asset is book value we are going to take over.
The underlying reason is explained below - In amalgamation in nature of merger, the existing owners of continue to become the owners of the combined entity and the entity would continue. It would not be appropriate to increase/decrease the value of assets/liabilities in such a case and recognize a gain. - In case of purchase, it is more like selling off the existing entity to outsiders and hence net book value is used.
