In October, 1994 the Institute of Chartered Accountants of India announced the Accounting Standards 14 (AS 14) prescribing it as a mandatory accounting standard for amalgamation. The standard attempts to harmonize the accounting practices on amalgamation.
Merger-pooling of interest method
Purchase Method
The transferee company records the assets, liabilities and reserves of the transferor company at the existing amount, after making the adjustments to wipe off the effect of divergent accounting policies, if any
The transferee company is free to restate the assets and liabilities of the transferor company at their fair value instead of book value.
The identity of the reserves of the transferor company is preserved and these appear in the same form in the books of the transferee company as well.
The identity of the reserves other than statutory reserves like Development Rebate Reserve, Investment Allowance Reserve etc. is not preserved.
