Hi
I'm involved in carrying out some Due Diligence for 2 incorporated charities potentially looking to combine.
Ther arrangements are such that they fit the criteria for a merger as per the charity SORP para 27.4 but 27.4A now disallows merger accounting in this instance due to "changes in UK company law"
I'm interested to know what the changes were and why do they now preclude incorporated charities
You'd think I'd got bigger things to worry about but does anyone know?
cheers
Replies (3)
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Read 27.4a carefully
My understanding is:
It does not refer to a "Merger" between charities it refers to an arrangement with third parties.
That is, something other than a straightforward merger wherein the parties jointly subsume themselves into what is in effect a new entity.
This is itself different from a "Takeover".
The descriptive words used in regulation are important.
Also read the final sentences of this paragraph.
To clarify further
1)
If the arrangement is clearly within the merger criteria set out in section 27.4 then merger accounting may be used.
2)
If the proposed arrangement does not fully meet those criteria, then it falls under 27.4a
For "Due diligence" the auditor should first satisfy himself re 1) above.