{"id":23138,"date":"2019-08-17T16:21:43","date_gmt":"2019-08-17T10:51:43","guid":{"rendered":"https:\/\/enterslice.com\/learning\/?p=23138"},"modified":"2025-12-10T17:43:02","modified_gmt":"2025-12-10T12:13:02","slug":"as-14-accounting-for-amalgamation","status":"publish","type":"post","link":"https:\/\/enterslice.com\/learning\/as-14-accounting-for-amalgamation\/","title":{"rendered":"Overview of AS-14: Accounting for Amalgamation"},"content":{"rendered":"<p class=\"has-drop-cap\">There is a specific standard mentioned in the <a class=\"glossaryLink\"  aria-describedby=\"tt\"  data-cmtooltip=\"&lt;div class=glossaryItemTitle&gt;Accounting&lt;\/div&gt;&lt;div class=glossaryItemBody&gt;Accounting is the language of business, serving as the backbone of financial management and decision-making. It involves the systematic recording, analysis, and reporting of financial(...)&lt;\/div&gt;\"  href=\"https:\/\/enterslice.com\/learning\/terms\/accounting\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'>Accounting<\/a> Standard for <strong><a href=\"https:\/\/enterslice.com\/learning\/accounting-aspects-of-amalgamations\/\">Accounting for Amalgamation<\/a> i.e. AS-14<\/strong>. The Accounting Standard (AS-14) is applicable when two companies amalgamate and accounting for amalgamation has been given effect. This Standard deals with the accounting treatment in the books of Transferee Company.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Types of Amalgamation<\/h2>\n\n\n\n<ul>\n<li><strong>Amalgamation in the Nature of Merger<\/strong>\n<ul>\n<li>All the assets and liabilities of the transferor company becomes asset and liabilities of the transferee company<strong>.<\/strong><\/li>\n\n\n\n<li>Shareholders holding not less than 90% of the face value of equity shares of Transferor Company becomes the equity <a class=\"glossaryLink\"  aria-describedby=\"tt\"  data-cmtooltip=\"&lt;div class=glossaryItemTitle&gt;Shareholder&lt;\/div&gt;&lt;div class=glossaryItemBody&gt;A shareholder is an individual or entity that owns at least one share of a company&amp;#039;s stock, granting them partial ownership of the company. This status allows them certain rights, including(...)&lt;\/div&gt;\"  href=\"https:\/\/enterslice.com\/learning\/terms\/shareholder\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'>shareholder<\/a> of the transferee Company.<\/li>\n\n\n\n<li>After incorporating the financial statements of the Transferee Company no adjustments should be made to the book value of assets and liabilities of the Transferor Company.<\/li>\n\n\n\n<li>The business of the Transferor Company is intended to be carried on by the Transferee Company<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<ul>\n<li><strong>Amalgamation in the Nature of Purchase<\/strong><\/li>\n<\/ul>\n\n\n\n<p>Amalgamation in the Nature of Purchase will only be considered when any one or more of the conditions mentioned in &ldquo;Amalgamation in the nature of Merger&rdquo; is not satisfied.<\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-large is-resized\"><img decoding=\"async\" loading=\"lazy\" src=\"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2021\/01\/Types-of-Amalgamation.png\" alt=\"Types of Amalgamation\" class=\"wp-image-45125\" width=\"384\" height=\"407\" srcset=\"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2021\/01\/Types-of-Amalgamation.png 512w, https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2021\/01\/Types-of-Amalgamation-283x300.png 283w\" sizes=\"(max-width: 384px) 100vw, 384px\"\/><\/figure><\/div>\n\n\n<h2 class=\"wp-block-heading\">Methods of Accounting for Amalgamation<\/h2>\n\n\n\n<p>As\nmentioned in AS-14 there are two types of Accounting for Amalgamation:<\/p>\n\n\n\n<ol>\n<li><strong>Pooling\nof Interest Method<\/strong><\/li>\n<\/ol>\n\n\n\n<p>In this method balance sheet of both companies were added together during <a aria-label=\"acquisition or merger (opens in a new tab)\" href=\"https:\/\/enterslice.com\/mergers-and-acquisitions-services\" target=\"_blank\" rel=\"noreferrer noopener\"><strong>acquisition or merger<\/strong><\/a> based on the book value.<\/p>\n\n\n\n<ul>\n<li><strong>Purchase\nMethod<\/strong><\/li>\n<\/ul>\n\n\n\n<p>In this\nmethod accounting of merger and acquisition in which one firm has purchased the\nasset of the other firm.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Difference between Pooling of\nInterest Method and Purchase Method<\/h2>\n\n\n\n<figure class=\"wp-block-table is-style-stripes\"><table><tbody><tr><td>\n  <strong>Sr.\n  No.<\/strong>\n  <\/td><td>\n  <strong>Pooling\n  of Interest Method<\/strong>\n  <\/td><td>\n  <strong>Purchase\n  Method<\/strong>\n  <\/td><\/tr><tr><td>\n  1.\n  <\/td><td>\n  This method applies in the case of\n  amalgamation in nature of the merger\n  <\/td><td>\n  This method applied in the case of\n  amalgamation in nature of the purchase.\n  <\/td><\/tr><tr><td>\n  2.\n  <\/td><td>\n  Asset, Liability and reserves of the\n  transferor company are also recorded by the transferee Company.\n  <\/td><td>\n  The transferee Company records in its book of\n  accounts only assets and liabilities taken over reserves except for the\n  statutory reserves of the transferor company are not aggregate with the\n  transferee company.\n  <\/td><\/tr><tr><td>\n  3.\n  <\/td><td>\n  The difference between the consideration paid and\n  the share capital of the transferor company is adjusted in the general\n  reserve or other reserves of the transferee company.\n  <\/td><td>\n  The difference between the consideration and the\n  net asset is taken over is treated by the transferee company as goodwill or\n  free reserve.\n  <\/td><\/tr><tr><td>\n  4.\n  <\/td><td>\n  It records at book value.\n  <\/td><td>\n  It records at fair <a class=\"glossaryLink\"  aria-describedby=\"tt\"  data-cmtooltip=\"&lt;div class=glossaryItemTitle&gt;Market&lt;\/div&gt;&lt;div class=glossaryItemBody&gt;A market is a structured environment, either physical or virtual, where buyers and sellers convene to trade goods and services. This trading hub operates based on the principles of supply and(...)&lt;\/div&gt;\"  href=\"https:\/\/enterslice.com\/learning\/terms\/market\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'>market<\/a> value.\n  <\/td><\/tr><tr><td>\n  5.\n  <\/td><td>\n  It applies in Merger\n  <\/td><td>\n  It applies to acquisition.\n  <\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\">Treatment of Goodwill Arising\non Amalgamation<\/h2>\n\n\n\n<p>Goodwill\narising on Amalgamation represents a future income and it is considered as an\nasset of the Company. Due to the nature of goodwill, it becomes difficult to\nestimate its useful life. It is considered to amortized goodwill over a period\nnot exceeding five years.<\/p>\n\n\n\n<p><em><strong>Factors to be considered in estimating the useful life of goodwill arising on amalgamation include:<\/strong><\/em><\/p>\n\n\n\n<ol>\n<li>The future of the business <\/li>\n\n\n\n<li>Changes in demand and other economic factors<\/li>\n\n\n\n<li>Expected or Potential competitors<\/li>\n\n\n\n<li>Legal, regulatory or contractual provisions\naffecting the life of Goodwill<\/li>\n<\/ol>\n\n\n\n<h2 class=\"wp-block-heading\">Treatment of Reserve described in\na scheme of Amalgamation<\/h2>\n\n\n\n<p>The\nScheme of amalgamation sanctioned under the law prescribes the treatment to be\ngiven to the reserves in the transferor company and accordingly as mentioned in\nthe scheme it should be followed. If the Scheme of amalgamation has been\nsanctioned under the law and treatment of reserves given to the transferor\ncompany is different compared to the requirement of this standard that would be\nconsidered that the no treatment has been prescribed by the scheme, the following\ndisclosure is required in the first financial statement following the\namalgamation:<\/p>\n\n\n\n<ul>\n<li>A detailed accounting treatment given to the reserves\nand the reason for the treatment given to reserves different from that as\nprescribed in the standard.<\/li>\n\n\n\n<li>Treatment of Reserves described in the scheme of\namalgamation is different compared to the requirement of this standard that\nwould be considered that no treatment has been prescribed by the scheme.<\/li>\n\n\n\n<li>Any financial effect arising due to such\ndeviations.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\">Disclosure<\/h2>\n\n\n\n<p><strong>As mentioned in AS-14 the acquirer shall disclose the following in the Financial Statement:<\/strong><\/p>\n\n\n\n<ul>\n<li>Name and general nature of the business of\nAmalgamating Company<\/li>\n\n\n\n<li>Effective date of amalgamation for accounting\npurpose<\/li>\n\n\n\n<li>Particular scheme sanctioned under the law.<\/li>\n\n\n\n<li>Method of accounting used to reflect the\namalgamation.<\/li>\n<\/ul>\n\n\n\n<p class=\"has-cyan-bluish-gray-background-color has-background\"><strong>Additional Disclosure required under the Pooling Interest Method.<\/strong><\/p>\n\n\n\n<ul>\n<li>Number of shares issued along with the\npercentage of each Company equity shares exchanged to effect the amalgamation.<\/li>\n\n\n\n<li>Amount of any difference between the\nconsideration and the value net identified assets acquired and the treatment\nthereof.<\/li>\n<\/ul>\n\n\n\n<p class=\"has-cyan-bluish-gray-background-color has-background\"><strong>Additional Disclosure required under the Purchase Method.<\/strong><\/p>\n\n\n\n<ul>\n<li>Consideration for the amalgamation and\nconsideration paid or contingently payable.<\/li>\n\n\n\n<li>The amount of any difference between the\nconsideration and the value of net identifiable assets acquired and treatment\nthereof including the period of <a class=\"glossaryLink\"  aria-describedby=\"tt\"  data-cmtooltip=\"&lt;div class=glossaryItemTitle&gt;Amortization&lt;\/div&gt;&lt;div class=glossaryItemBody&gt;Amortization is a financial concept that is critical in various aspects of personal and business finance. It&amp;#039;s a process that involves the gradual repayment of a debt or the allocation of(...)&lt;\/div&gt;\"  href=\"https:\/\/enterslice.com\/learning\/terms\/amortization\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'>amortization<\/a> of any goodwill arising on\ngoodwill.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\">Conclusion<\/h2>\n\n\n\n<p>This Standard helps the Companies to keep the uniformity in <strong>Accounting for amalgamation<\/strong><sup><a href=\"https:\/\/www.mca.gov.in\/Ministry\/notification\/pdf\/AS_14.pdf\"><strong>[1]<\/strong><\/a><\/sup> and accordingly, the Companies need to give the treatment and if there is any deviation in the treatment needs to be disclosed in the financial statement so that stakeholders can get the transparency.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>There is a specific standard mentioned in the Accounting Standard for Accounting for Amalgamation i.e. AS-14. The Accounting Standard (AS-14) is applicable when two companies amalgamate and accounting for amalgamation has been given effect. This Standard deals with the accounting treatment in the books of Transferee Company. Types of Amalgamation Amalgamation in the Nature of [&hellip;]<\/p>\n","protected":false},"author":4,"featured_media":45328,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1314],"tags":[995,2660,2644],"acf":{"service_id":"103"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v14.6.1 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Overview of AS-14: Key Principles of Accounting for Amalgamation<\/title>\n<meta name=\"description\" content=\"Learn how accounting standard 14 governs amalgamations with insights into pooling, purchase methods, and disclosure requirements. Click to explore.\" \/>\n<meta name=\"robots\" content=\"index, follow\" \/>\n<meta name=\"googlebot\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<meta name=\"bingbot\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/enterslice.com\/learning\/as-14-accounting-for-amalgamation\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Overview of AS-14: Key Principles of Accounting for Amalgamation\" \/>\n<meta property=\"og:description\" content=\"Learn how accounting standard 14 governs amalgamations with insights into pooling, purchase methods, and disclosure requirements. Click to explore.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/enterslice.com\/learning\/as-14-accounting-for-amalgamation\/\" \/>\n<meta property=\"og:site_name\" content=\"Enterslice\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/enterslice\" \/>\n<meta property=\"article:author\" content=\"enterslice\" \/>\n<meta property=\"article:published_time\" content=\"2019-08-17T10:51:43+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2025-12-10T12:13:02+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2019\/08\/Overview-of-AS-14-Accounting-for-Amalgamation.png\" \/>\n\t<meta property=\"og:image:width\" content=\"670\" \/>\n\t<meta property=\"og:image:height\" content=\"352\" \/>\n<meta name=\"twitter:card\" content=\"summary\" \/>\n<meta name=\"twitter:creator\" content=\"@enterslice\" \/>\n<meta name=\"twitter:site\" content=\"@enterslice\" \/>\n<!-- \/ Yoast SEO plugin. -->","authorName":"Narendra Kumar","authorImageUrl":"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2019\/04\/nk-1.jpg","authorDescription":"Experienced Finance and Legal Professional with 12+ Years of Experience in Legal, Finance, Fintech, Blockchain, and Revenue Management.","postViews":905,"readingTime":3,"nextPost":{"id":23132,"slug":"changes-in-portfolio-management-system-norms"},"prevPost":{"id":23116,"slug":"quoting-of-din-is-mandatory-for-income-tax-communications-cbdt"},"featuredMediaUrl":"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2019\/08\/Overview-of-AS-14-Accounting-for-Amalgamation.png","postTerms":"Finance &amp; Accounting","_links":{"self":[{"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/posts\/23138"}],"collection":[{"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/comments?post=23138"}],"version-history":[{"count":3,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/posts\/23138\/revisions"}],"predecessor-version":[{"id":89751,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/posts\/23138\/revisions\/89751"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/media\/45328"}],"wp:attachment":[{"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/media?parent=23138"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/categories?post=23138"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/tags?post=23138"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}