Merger accounting, Business Law and Ethics

MERGER ACCOUNTING:

It may happen that, during a "take-over" of one company (A) by another company (B), shares in the latter company are issued to shareholders of the former company in exchange. Company A would then be dissolved and Company B would acquire its shares. Should a share premium account be established by company B when the assets of Company A exceed the nominal value of Company A's shares? If a share premium account is opened the pre-acquisition profits of Company A would not be distributed by Company B. It may therefore be decided that no share premium account is to be opened. Further this method of accounting is called as "merger accounting".

AQUISITION ACCOUNTING AND "MERGER RELIEF"

In SHEARER V BERCAIN (1980) it was held that "merger accounting" is illegal and that a "true value" must be attributed to the non-cash assets acquired and the excess of the "true value" over the nominal value of the shares must be transferred to a share premium account. This method of accounting is known as "acquisition accounting" and means that the pre-acquisition profits of Company A cannot be distributed by Company B. It is yet unclear as to whether Kenya courts will adopt the decision in Shearer v Bercain. The Kenya Companies Act does not provide "merger relief" that was introduced by the English Companies Act of 1981.

Posted Date: 1/12/2013 4:14:25 AM | Location : United States







Related Discussions:- Merger accounting, Assignment Help, Ask Question on Merger accounting, Get Answer, Expert's Help, Merger accounting Discussions

Write discussion on Merger accounting
Your posts are moderated
Related Questions
Explain the principle of absolute immunity The absolute immunity principle gradually eroded and restrictive immunity approach was followed. However, many developing countries r

Hire-Purchase and Credit Sale - Sales of good A Credit sale is a sale on credit. Whether A buyer of goods may be unable for pay the price in full on once and the seller may let

Protection of General Public: It may happen that a resolution reducing a company's capital was passed in circumstances which indicate that the shareholders had not been proper

Law of Contract: Mr.Sakr who owns a factory in Baabda for manufacturing furniture, signed a contract in his factory in 12-7-2009 with Mr.Abdo who used to import woods from Bra

Explain the basic criticism of the stages framework The basic criticism of the stages framework is that it, in a formal sense, parallels the cognitive steps of the rational ap

The role of expectation of winning the election The role of expectation, of possibility of winning the election and of policy convergence on choice of agenda. In standard mode

What are types of segments required for decision? A judge’s decision is made up of two segments, which are given below: a. Obiter dicta: Things said through the way on

Proceedings for Compulsory Liquidation: When the petition is presented to the court a copy is delivered to the company in case it objects, and it is advertised so that other

The  defendants, while sympathetic, may believe that the ultimate responsibility of a child's safety and welfare belongs to the parent themselves. To the extent that the parents we

Question 1: Define, distinguish and discuss the limits of each of the following mechanism of Alternative Dispute Resolution, namely; (a) Conciliation; and (b) Negotiation.