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
Define the types of interaction on which literature can be found There are two types of interaction on which literature can be found. These are interactions within the legisla

Question 1: (i) Distinguish between industrial relations and employee relations. (ii) State the environmental factors that affect employee relations. (iii) Give five r

PUBLICATION: Whether in section 46(3) of the constitution states that like, upon a Bill that has been passed through the National Assembly being presented to the President for

Public Law: Whether it contain of those fields or branches of law  where such the state has an interest as the sovereign egg criminal law, administrative law, constitutional l

STATUTORY PROVISIONS: Article 4 of Table A permits a company to vary the rights attached to any class of shares if the proposed variation is consented to in writing by the hol

How was Negligence the main cause? Negligence was the major cause: A claim for damages can only succeed when there has been damage or loss to the claimant. Illustrations

State Article 8 of Universal Declaration of Human Rights. Article 8 - 'Everyone has a  right to  an  effective  remedy by  the  competent national tribunal for acts violating t

Explain in detail about the policy co-ordination of each country With no policy coordination each country will attempt to maximise its own welfare, taking the other country's m

Question: Consider the following formulation of Kant's Categorical Imperative: ‘Act only to that maxim by which you can at the same time will that it should become a universal

Question 1: Discuss the main problems faced by judges when interpreting a piece of legislation. Question 2: A necessary evil': Would you agree with this definition of d