In page 2.94, Illustration 8 while finding purchase consideration, all the assets and liabilities are taken over rite so why can't we find using net assets approach like all assets - liabilites

Swathi Krishna

Swathi Krishna

CA Inter


17-Aug-20 22:45


Answers (1)

Purchase consideration is the consideration received on selling the company. The Net Assets approach is taken when the information about the purchase consideration is not available. But here, in this question, it is clearly stated that Prabhu & Co. are receiving 25,000 equity shares of Rs.10 each at a premium of Rs.2 per share. So since the amount of purchase consideration is directly given, Net Assets approach is not considered.

Madhuri Veluri

Madhuri Veluri


18-Aug-20 13:29