Greetings all and thank you in advance for any kind technical advice you may be able to provide.
My client is an Irish company currently owned 95%/5% by two shareholders. My client is seeking to acquire 3 non-Irish companies at their book values of respectively [500,000], [10,000] and [10,000] Euro, with shares issued to the two shareholders (who own all 3 companies) according to a term sheet which subsequently provides for the issuance of additional shares to new shareholders in the Irish company for cash.
I believe that the accounting entry for Stage 1 of this transaction in the books of the Irish company is Dr FAI, Cr Share Capital, Cr Share Premium (to the extent of the FAI book valuation less Share Capital issued). Is this correct?
Subsequently, in Stage 2, the Irish company will issue shares for cash to new shareholders at an agreed valuation for the Irish company of [12m] Euro (consistent with the term sheet that has been entered into by the existing and new shareholders of the Irish company).
In this Stage 2, I believe that the accounting entry for this transaction in the books of the Irish company is Dr Cash, Cr Share Capital, Cr Share Premium (to the extent of the cash invested less Share Capital issued). Is this correct?
Main question - I cannot see myself that the second of these two events should give rise to any adverse accounting implication or book accounting revaluation of the acquisitions undertaken in Stage 1, nor should these two events create in themselves any tax liability within the Irish company. However I should be most grateful if anyone has a different perspective, and if so how best to mitigate any adverse implications from what is proposed.
Many thanks in advance for your consideration and responses.