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CS Professional · Corporate Restructuring, Valuation and Insolvency · Accounting in Corporate Restructuring: Concept and Accounting Treatment

Sundaram Textiles Ltd transfers its entire weaving division as a going concern to Kaveri Mills Ltd for a lump sum of Rs 9 crore, without assigning values to individual assets and liabilities. How is this transaction described?

This is a slump sale, because an undertaking is transferred as a going concern for a lump sum consideration without separate values for individual assets and liabilities. An itemised sale would value each asset separately, and nothing here suggests a demerger or buy-back.

  1. ASlump saleCorrect
  2. BItemised asset sale
  3. CDemerger under a court scheme
  4. DBuy-back of shares

Explanation

A transfer of one or more undertakings as a going concern for a lump sum consideration, without values assigned to individual assets and liabilities, is a slump sale. An itemised sale would assign separate values to each asset and liability. No share capital change or court scheme is involved here.

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