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CA Intermediate · Advanced Accounting · AS 14 Accounting for Amalgamations

Rohan Ltd absorbs Sameer Ltd in an amalgamation in the nature of merger. Sameer Ltd has 40,000 equity shares of Rs 10 each fully paid, and Rs 3,00,000 of General Reserve. Purchase consideration is 50,000 equity shares of Rs 10 each of Rohan Ltd, issued fully paid. What is the treatment of the difference in Rohan Ltd's books under pooling of interests?

Rohan Ltd issues share capital of Rs 5,00,000 against Sameer Ltd's share capital of Rs 4,00,000. Under pooling of interests the Rs 1,00,000 excess is adjusted against reserves, so the general reserve incorporated falls from Rs 3,00,000 to Rs 2,00,000. No goodwill is recognised.

  1. AGeneral Reserve is reduced by Rs 1,00,000Correct
  2. BCapital Reserve is credited Rs 1,00,000
  3. CGeneral Reserve is increased by Rs 1,00,000
  4. DGoodwill is debited Rs 1,00,000

Explanation

Share capital issued is 50,000 x 10 = 5,00,000, against transferor's share capital of 4,00,000. The excess of 1,00,000 is deducted from reserves, so General Reserve incorporated is 3,00,000 - 1,00,000 = 2,00,000. Goodwill is not recognised in pooling.

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