jijosaji epz power point
TRANSCRIPT
jijosaji epz creationzzz 1
BY ,JIJO SAJI
SRO 0455534
EXTERNAL AND INTERNAL RE-CONSTRUCTONS
30-jun-15
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WHY ? RE-CONSTRUCTION
*CHANGED NATURE OF BUSINESS*DOWNSIZING*NEW-WORK METHODS*NEW-MANAGEMENT METHODS*QULITY MANAGEMENT*TECHNOLOGY*FINANCE RELATED ISSUES*STATOTARY LEGAL COMPLIMENTS
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WHAT? RE-CONSTRUCTION
when a company is suffering loss for several past years and suffering from financial difficulties, it may go for reconstruction. In other words, when a company's balance sheet shows huge accumulated losses, heavy fictitious and intangible assets or is in financial difficulties or is to over capitalized, and then the process of reconstruction is restored.Reconstruction may be internal and external
30-jun-15
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HOW?RE-CONSTRUCTION
RE-CONSTRUCTION
EXTERNAL
AMALGAMATION
Merger method
Purchasemethod
ABSORBTION
AQUSITION
INTERNAL
Alteration of share capital
Reduction of Share capital
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EXTERNAL RE-CONSTRUCTION
When a company is suffering losses for the past several years and facing
financial crisis, the company can sell its business to another newly formed
company. Actually, the new company is formed to take over the assets and
liabilities of the old company. This process is called external
reconstruction.
In other words, external reconstruction refers to the sale of the business of
existing company to another company formed for the purposed. In external
reconstruction, one company is liquidated and another new company is
formed. The liquidated company is called "Vendor Company" and the new
company is called "Purchasing Company". Shareholders of vendor
company become the shareholders of purchasing company.
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AMALGAMATION
AMALGAMATION IS UNION OF TWO OR MORE COMPANIES MADE WITH AN INTENTION TO FORM A NEW COMPANY
THERE ARE TWO TYPE OF METHOD FOR AMALAGAMATION
Pooling of interest method (merger method) Purchasing method
Amalgamation accounting was stated in AS14
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MERGER METHOD
Under this method is a genuine pooling not merely of assets and liabilities of the amalgamating companies but also of the share holders interest and of the business of the companies
Under this method all the assets and liabilities not only but also all reserves also should be transferred at there carrying amount
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PURCHASE METHOD
A mode by which one company acquires another company and as a consequence the shareholders of the company which is acquired normally do not continue to have a proportionate share in the equity of the company
Under this method they will not bound to take all asset and liabilities of transferee company
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AS-14* All asset and liabilities of the transferor company become, after
amalgamation , the asset and liabilities of the transferee company
* Shareholders holding not less than 90% of the face value of the equity shares of the transferor company [other than the equity share already held therein , immediately before the amalgamation , by transferee company or its subsidiaries or there nominee’s] become equity share holders of the transferee company by virtue of amalgamation
* The consideration for the amalgamation receivable by those equity share holders of the transferee company who agree to become equity share holders of the transferee company , except that cash may be paid in respect of any fractional shares
* The business of the transferor company is intended to be carried on after
the amalgamation by the transferee company
* No adjustment is instated to be made to be book value of the asset and liabilities of the transferor company when they are incorporated in the financial statement of the transferee company (except to ensure the uniformity of accounting policies )
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ABSORPTION
Absorption is the process under which an existing large company purchases the business of another small company or companies doing similar business. In other words, when an existing company takes over the business of one or more existing companies carrying similar business, it is called absorption. The company whose business is acquired is liquidated. But, no new company is formed. The company which takes over the business is called absorbing or purchasing company and the company, the business of which is taken over is called absorbed or vendor company. The accounting record of absorption is similar to that of amalgamation
One or more companies are liquidated. No new company is formed. The nature of business of both companies is similar. Generally, larger company purchase the business of smaller
company
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ACQUSITION
A corporate action in which a company buys most, if not all, of the target company's ownership stakes in order to assume control of the target firm. Acquisitions are often made as part of a company's growth strategy whereby it is more beneficial to take over an existing firm's operations and niche compared to expanding on its own. Acquisitions are often paid in cash, the acquiring company's stock or a combination of both.
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INTERNAL RE-CONSTRUCTION
Internal reconstruction refers to the internal re-organization of the financial structure of a company. It is also termed as re-organization which permits the existing company to be continued. Generally, share capital is reduced to write off the past accumulated losses of the company. The accounting procedure of internal reconstruction is distinct from that of amalgamation, absorption and external reconstruction.
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Reduction of share capital
Sometimes there may be a genuine necessity for the reduction of capital. This power is, given by Section 100 of the Companies Act,
* Methods of Reduction in Share Capital:There are three ways to give effect to the scheme of Reduction in Share Capital. These are as follows:(1) By extinguishing or reducing the liability on any of its shares.(2) By paying off any paid-up share capital which is in excess of what is required by the company.(3) By cancelling any paid- up capital which is lost or is unrepresented by any available assets.
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Alteration of share capital
Memorandum of Association contains capital clause of a company. Under Section 94 of the Companies A company can alter share capital in any of the following ways:(a) The company may increase its capital by issuing new shares.(b) It may consolidate the whole or any part of its share capital into shares of larger amount.(c) It may convert shares into stock or vice versa.(d) It may sub-divide the whole or any part of it’s share capital into shares of smaller amount.(e) It may cancel those shares which have not been taken up and reduce its capital accordingly.
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some real life examples
*Face book acquire whatsapp*Hutch amalgamated with Vodafone *Nokia absorbed by Microsoft *BPL reconstructed into Videocon*DOCOMO change their structure*ASIANET absorbed by STAR group
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THANK YOU ALL