Distinguish between amalgamation and internal reconstruction
Answers
Amalgamation means the merging of two or more than two companies for eliminating competition among them or for growing in size to achieve the economies of scale. Amalgamation is a broad term which includes mergers (uniting of two existing companies) and acquisition (one company buying out another company).
There are two types of amalgamation: According to AS-14 amalgamation is divided into the following two categories for accounting purposes:
(A) Amalgamation in the nature
of merger; and
(B) Amalgamation in the nature of purchase.
External reconstruction: Introduction
Reconstruction refers to certain arrangements made by financially unsound companies. The reconstruction arrangement made by a company, to come out of its financial difficulties, may be external or internal. External reconstruction refers to closing/liquidating the company and starting again a new or a fresh. That is technically, a new company will be floated or formed to take over the existing company. Internal reconstruction refers to making internal arrangements for overcoming financial difficulties