My company has just formed a new Group company and they are planning to do a share for share transfer i.e. the existing shareholders of the two existing trading companies will be issued with shares for in the new Group company in exchange for them.
My question is how do I account for this on an Group basis. I assume goodwill will be created but what do I use as the basis for the calculation?
Thanks very much in advance!
Replies (6)
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There is no goodwill in the books of the acquiring company. It is acquiring shares, not goodwill. All the holding company has to do is account for the issue of its new shares.
You have to deal with the cost of acquisition in the books of the holding company somewhat sooner than you will need to worry about the goodwill arising on consolidation. It’s the issue price of the shares. What does (or will?) the return of allotments say?
Hi, did you manage to get a solution on this one as I have exactly the same problem - I am struggling to find out the double entry to eliminate pre "acquisition" resrves on consolidation - as there was no "purchase" as such - just a share exchange - the only thing I can think of is to have negative goodwill matching the reserves.