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Accounting for share for share transfer

Group company being formed and previous shareholders gain shares in new group company

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!

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25th Apr 2018 11:53

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.

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to johngroganjga
25th Apr 2018 12:48

In the consolidated group accounts would there not be?

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to rslinger
25th Apr 2018 12:53

Very possibly, depending on the numbers.

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to johngroganjga
25th Apr 2018 13:44

Hi John,

So we have 2 previous companies one that is loss making as not yet peropely trading (just some start up costs) and one that has been trading for a number of years.

I am guessing I would need to do a full valuation of all the intangibles and calculate out the goodwill properly, but nevertheless what would be the number I would use as the cost of acquisition in the goodwill as there has been nothing purchased just a share for share swap

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to rslinger
25th Apr 2018 13:54

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?

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