Question

What accounting method was used to account for the merger of Continental and United? What are the reporting implications? In your opinion was this a successful merger? Which company do you think gained the most benefit? Why.

Answer 1

1) Amalgamation means joining of two or more existing companies into one company, the joined companies lose
their identity and form themselves into a new company.
2) In absorption, an existing company takes over the business of another existing company. Thus, there is only one liquidation and that is of the merged company.
3 ) A company which is merged into another company is called a transferor company or a vendor company.

°ACCOUNTING METHOD USED TO ACCOUNT FOR MERGER ARE

There are two main methods of accounting for
amalgamation:
a) The pooling of interests method, and
b) The purchase method.
c) Under pooling of interests method, the assets, liabilities
and reserves of the transferor company will be taken over by the translferee company or existing carrying company

Under purchase method,

the assets and liabilities of the
transferor company should be incorporated at their existing
carrying amounts or the purchase consideration should be
allocated to individual identifiable assets and liabilities on the
basis of their fair values at the date of amalgamation

Some of the advantages of merger are

* Economies of scale

* Increasing operations

* Cutting prices

* Over coming competetiors

Some of the company's gained by Merger are

Tata acquisition of steel group

Vodafone idea merger

Flipkart acquisition of ebay

Thank you hope this usefull