Archive about 'Stock Write Off and Provision'

Company Reconstruction-Type (Part 1)

Company Reconstruction:-

· A term used to describe the drastic formal changes in a company’s capital structure as a result of certain circumstances.

Type of Reconstruction:-

·     Divided into two(2) types namely:
·       Internal reconstruction
·      External reconstruction

Internal Reconstruction:-

· Undertaken by companies that have surplus capital or companies whose capital has been eroded by trading losses

· In this type of internal reconstruction, companies who [...]

Valuation Of Goodwill By The Arbitrary Assessment Method

In this Arbitrary Assessment Method either the purchaser or seller or both parties may estimate the value to be placed on the goodwill

This method normally applies [...]

Exclusion From Consolidation

Exclusion From Consolidation Under IAS 27

A parent company is exempted from presenting consolidated financial statements where it is:

(a) a wholly owned subsidiary; or

(b) a virtually wholly owned subsidiary and it obtains the approval of the owners of the minority interest not to present consolidated financial [...]

Definition Of Control In Consolidation Exercise

Definition Of Control Under IAS 27

1. IAS 27 defines control as “ the power to govern the financial and operating policies of an enterprise so as to derive benefits from its activities”

2. Control is presumed to exist when the investor owns, directly or indirectly more than one half of the voting power of an investee.

3. IAS [...]

Definition Of Subsidiary

Companies Act defines a subsidiary company as one:

(a) in which the investor company
     (i)    controls the composition of the board of directors of the investee company;
     (ii)   controls more than one half of the voting power of the investee company; or
     (iii) holds [...]

Goodwill Valuation- Factors Affecting Valuation & Various Methods

Goodwill depends on many factors like:

the nature/type of the business,
the type of customer which such a business is inherently likely to attract,
the expenditure already made in advertisements & promotions establishing the business,
the reputation existing and
the probabilities of the market.

[As described earlier, goodwill consists of the advantages a business has in connection with its [...]

Purchase of A Partnership’s Business(Part 2)

When a partnership is taken over by a limited company, the partnership is considered as dissolved and the business is sold as a going concern to the limited company. Accounting entries in the Purchaser’s book ( limited company) is similar to the sole trader’s business.
Refer to Part 1 re: purchase of a sole-trader business.As [...]

Purchase Of A Sole Proprietor’s Business (Part 1)

This type of purchase of business is usually a mere “conversion” of a sole-proprietorship to a limited company where the seller (sole-proprietor) will be allotted shares in the Limited Company.

In the Purchaser’s books, the following steps need to be taken:

(a) transfer all assets & liabilities into the Purchase of Business a/c

(b) the purchase consideration to [...]