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Basics of common control merger accounting?

How do I account correctly for two 100% wholly owned subsidiaries that are merging?

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Please can anyone offer advice -

We have two UK subsidiaries, let's say A and B, which are both 100% owned by the UK parent entity. We have decided, for business / operational purposes, to merge the trading activities of A and B in to one merged entity. Entity B will effectively acquire the assets and liabilities of entity A. Post-merger, entity B will continue trading, whilst entity A will continue to exist as a dormant entity.

My questions are

(1) do we need to revaluate the assets of entity A at the merge date?

(2) Is any purchase price consideration paid by any one entity to another?

(3) How do we account for the share capital in entity A, which is 100% owned by the common parent?

Thanks for any advice, Martin


Replies (3)

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By johngroganjga
15th Aug 2019 17:06

(1) Not unless you want to
(2) You tell us
(3) As you do now

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By johnt27
19th Aug 2019 13:02

Reporting under IFRS, FRS 102 or other?

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By paul.benny
19th Aug 2019 13:26

'Merger' itself is a colloquial term which doesn't usually describe the transaction.

It could be here that A is selling its customer list, fixed assets, stock, etc to B. Or B is buying A from the parent and then planning to hive up the assets etc.

Answering the question requires too much information to deal with in a web forum. You should discuss with your company accountant/auditor, who may also be able to assist with tax planning on the 'merger'.

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