to
take
over
their
business,
it
is
called
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amalgamation,
two
or
more
companies
dissolve
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DEFINITION of 'Amalgamation'
The combination of one or more companies into a
new entity. An amalgamation is distinct from a merger
because neither of the combining companies survives as
a legal entity. Rather, a completely new entity is formed
to house the combined assets and liabilities of both
companies.
Amalgamation is defined as a simple arrangement
or reconstruction of business. It is a process that
involves combining of two or more companies as either
absorption or as blend. Two or more companies can
either be absorbed by an entirely new firm or a
subsidiary powered by one of the basic firm. In such
cases all the shareholders of the absorbed company
automatically become the shareholders of the ruling
company as the amalgamating company loses its
existence.
All
the
assets
and
liabilities
are
also
has
given
different
forms
to
are
automatically
transferred
to
the
new
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Features Of Amalgamation
* Two or more existing companies are liquidated.
* A new company is formed to take over the business of
liquidating
companies.
which
come
together
are
Known
as
which
the
Transferor
companies
get
the
Legal
independent
Status
of
other
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o Not
merely
Assets
and
Liabilities
of
the
Amalgamating companies
o But also the interest of Shareholders and business of
the companies.
Second is Amalgamation in Nature of Purchase .
o A mode by which one company acquires another
company and
o As a consequence the shareholders of company
which acquired normally do not continue to possess
interest in equity of the combined company in an
identical proportion to that held by them in liquidated
company. Also the business of company which
acquired is not necessarily intended to be continued.
AS 14 gives 5 Specific conditions on fulfillment of which
Amalgamation is treated as merger.
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Five Conditions
1. All the ASSETS and liabilities of transferor company
become assets and liabilities of transferee company.
2. Shareholders of SC holding not less than 90 % of
Face value of equity shares become shareholders of
PC by virtue of Amalgamation
computing 90%
. For purpose of
considered
a. Shares held by PC in SC
b. Shares held by One or more subsidiaries of PC in SC
c. Nominees of PC in SC
3. The Consideration Paid to Equity shareholders of SC is
in form of Equity shares of PC , Except cash may be
paid for Partial shares.
4. Business of is intended to be continued on after
amalgamation by PC and
5. Assets and liabilities of SC are incorporated in
financial statements of the PC at book values except
to ensure uniform accounting policies.
AS 14 provides two methods of accounting for AS 14
,Which are
Pooling of Interest method for
Amalgamation in
nature of Merger
Purchase method of Amalgamation in nature of
purchase.
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company
were to
have conflict of
and
needs to be disclosed in
directors report.
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B.
Dr
Liabilities A/C
To Realization
Dr
Purchase consideration .
Due entry :
Transferee Company
To Realisation
Dr
Payment entry
Shares in transferee company
Bank
Dr
To transferee company
Dr
Dr
To Assets (Book value)
To Realisation ( Profit)
Dr
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To Realisation
Realisation Expenses
a. Incurred by transferor company
Realisation A/C
To Bank
Dr
Dr
Bank
Dr
To Transferee company
c. Incurred by Transferee company
No Entries
Amount Due to equity share holders.
Equity share capital
Reserves
To Shareholders
Dr
Dr
to
Dr
Shareholders
by
transfer
of
Consideration received.
Share holders A/C
Dr
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Dr
Others
Cancellation of Intercompany Owings.
Creditors
To Debtors
Dr
To Stock Reserve
Realisation Expenses
Goodwill/Capital reserve Dr
To bank
Contra entry for statutory reserve
of which liability is
Dr
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Example of Amalgamation
Consider the example of amalgamation shown in the following
diagram.
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Page 17 of 28
Maruti suzuki
Maruti Suzuki India Limited is an automobile manufacturer in
India. It is a subsidiary of Japanese automobile and motorcycle
manufacturer Suzuki. As of November 2012, it had a market share of
37% of the Indian passenger car markets. Maruti Suzuki manufactures
and sells a complete range of cars from the entry level Maruti 800,
Alto, to the hatchback Ritz, Celerio, , A-Star, Swift, Wagon R, Zen and
sedans DZire, Ciaz, Kizashi and SX4, in the 'C' segment Eeco, Omni,
Multi Purpose vehicle Suzuki Ertiga and Sports Utility vehicle Grand
Vitara.
The company's headquarters are at No 1, Nelson Mandela Road,
New Delhi. In February 2012, the company sold its ten millionth
vehicle in India.
Joint venture related issues
Relationship between the Government of India, under the United
Front (India) coalition and Suzuki Motor Corporation over the joint
venture was a point of heated debate in the Indian media until Suzuki
Motor Corporation gained the controlling stake. This highly profitable
joint venture that had a near monopolistic trade in the Indian
automobile market and the nature of the partnership built up till then
was the underlying reason for most issues. The success of the joint
venture led Suzuki to increase its equity from 26% to 40% in 1987, and
further to 50% in 1992. In 1982 both the venture partners had entered
into an agreement to nominate their candidate for the post of Managing
Director and every Managing Director will have a tenure of five years
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R.C. Bhargava was the initial managing director of the company since
the inception of the joint venture. Till today he is regarded as
instrumental for the success of Maruti Suzuki. Joining in 1982 he held
several key positions in the company before heading the company as
Managing Director. Currently he is on the Board of Directors. After
completing his five-year tenure, Mr. Bhargava later assumed the office
of Part-Time Chairman. The Government nominated Mr. S.S.L.N.
Bhaskarudu as the Managing Director on 27 August 1997. Mr.
Bhaskarudu had joined Maruti Suzuki in 1983 after spending 21 years
in the Public sector undertaking Bharat Heavy Electricals Limited as
General Manager. In 1987 he was promoted as Chief General Manager.
In 1988 he was named Director, Productions and Projects. The next
year (1989) he was named Director of Materials and in 1993 he
became Joint Managing Director.
Suzuki did not attend the Annual General Meeting of the Board
with the reason of it being called on a short notice. Later Suzuki Motor
Corporation went on record to state that Bhaskarudu was
"incompetent" and wanted someone else. However, the Ministry of
Industries, Government of India refuted the charges. Media stated from
the Maruti Suzuki sources that Bhaskarudu was interested to indigenise
most of components for the models including gear boxes especially for
Maruti 800. Suzuki also felt that Bhaskarudu was a proxy for the
Government and would not let it increase its stake in the venture. [21] If
Maruti Suzuki would have been able to indigenise gear boxes then
Maruti Suzuki would have been able to manufacture all the models
without the technical assistance from Suzuki. Till today the issue of
localization of gear boxes is highlighted in the press.
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Manufacturing facilities
Maruti Suzuki has two manufacturing facilities in India. Both
manufacturing facilities have a combined production capacity of
14,50,000 vehicles annually. During a recent meeting of the Gujarat
chief minister with Suzuki Motor Corp chairman & CEO Osamu
Suzuki,the Chairman had said that the work on car manufacturing plant
at Mandal near Ahmedabad would be started soon. Maruti Suzuki to
set up second plant in Gujarat; acquires 600 acres.
The Gurgaon manufacturing facility has three fully integrated
manufacturing plants and is spread over 300 acres (1.2 km2). All three
plants have an installed capacity of 350,000 vehicles annually but
productivity improvements have enabled it to manufacture 900,000
vehicles annually. The Gurgaon facilities also manufacture 240,000 KSeries engines annually. The entire facility is equipped with more than
150 robots, out of which 71 have been developed in-house. The
Gurgaon Facilities manufactures the 800, Alto, WagonR, Estilo, Omni,
Gypsy, Ertiga, Ritz and Eeco.
The Manesar manufacturing plant was inaugurated in February
2007 and is spread over 600 acres (2.4 km2). Initially it had a
production capacity of 100,000 vehicles annually but this was
increased to 300,000 vehicles annually in October 2008. The
production capacity was further increased by 250,000 vehicles taking
total production capacity to 550,000 vehicles annually. The Manesar
Plant produces the A-star, Swift, Swift DZire, SX4, Ritz and Celerio.
Page 20 of 28
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Amalgamation of Firms
Amalgamation of Firms When two or more firms merge into one
firm and makes a new firm, then this is called amalgamation of firms.
For accounting point of view this definition is so important because if
one firm purchases other firm, then this is not called amalgamation but
if both firms decide to join or integrate then this is called
amalgamation. For Example, Suppose A and B firm decide to close
their business and start the business with the name of AB firm after
joining with each other then this is called amalgamation of A and B
firm. Steps for closing the accounts of old firm at the time of
amalgamation of firms When two firm amalgamate with each other, at
this time we treat following accounting in the books of old firms so
that all doubt solves.
1st: Revaluation of Assets and Liabilities All entries same as at
the time of admission and retirement
2nd: Transferring reserve to old partners capital account into
their old ratio
3rd: Treatment of Goodwill We evaluate the goodwill according
to the condition of agreement and then goodwill will open with agreed
value int the books
4th: Treatment of Assets and liabilities not taken by new firm If
assets and liabilities are not taken by new firm, then these item will
transfer to the capital accounts of partners of old firm and we close
these accounts Treatment of assets and liabilities taken by new firm In
the books of old partners a For closing the account of assets New
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CONCLUSION
Page 27 of 28
BIBLIOGRAPHY
http://www.svtuition.org/2008/12/steps-for-closing-accounts-ofold-firm.html
http://www.examrace.com/StudyMaterial/Commerce/Accounting-and-Audit/Amalgamation-ofFirms.html
http://www.goodreturns.in/news/2013/02/08/maruti-suzukischeme-amalgamation-159664.html
en.wikipedia.org/wiki/Amalgamation
www.investopedia.com/terms/a/amalgamation.asp
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