For the purpose of accounting for amalgamations, we are essentially guided by AS-14 'Accounting for Amalgamations'. Para 3(g) of AS-14 defines the term purchase consideration as the "aggregate of the shares and other securities issued and the payment made in the form of cash or other assets by the transferee company to the shareholders of the transferor company". Therefore purchase consideration does not include the sum which the transferee company will directly pay to the creditors of the transferor company. The purchase consideration essentially depends upon the fair value of its elements. For example, when the consideration includes securities, the value fixed by the statutory authority may be taken as the fair value. In case of other assets, the fair value may be determined by reference to the market value of the assets given up or in the absence of market value, book value of the assets are considered. Sometimes adjustments may have to be made in the purchase consideration in the light of one or more future events. When the additional payment is probable and can be reasonably estimated it is to be included in the calculation of purchase consideration. C31 Example : Let us consider the Balance Sheet of X Ltd. as on 31st March, 2006: Liabilities Rs.('000) Assets (Rs.000) Share Capital Land &Buildings 50,00 Equity Shares of Rs. 10 each 75,00 Plant & Machinery 45,00 14% Preference Shares of Furniture 10,50 Rs. 100 each 25,00 Investments 5,00 General Reserve 12,50 Stock 23,00 12% Debentures 40,00 Debtors 24,00 Sundry Creditors and other Cash & Bank balance 15,00 Current liabilities 20.00 172,50 172.50 Other Information: () Y Ltd. takes over X Ltd. on 10th April, 2006. (ii) Debentureholders of X Ltd. are discharged by Y Ltd. at 10% premium by issuing 15% own debentures of Y Ltd. 14% Preference Shareholders of X Ltd. are discharged at a premium of 20% by issuing necessary number of 15% Preference Shares of Y Ltd. (Face value Rs. 100 each). (iv) Intrinsic value per share of X Ltd. is Rs. 20 and that of Y Ltd. Rs. 30. Y Ltd. will issue equity shares to satisfy the equity shareholders of X Ltd. on the basis of intrinsic value. However, the entry should be made at par value only. The nominal value of each equity share of Y Ltd. is Rs. 10 Compute the purchase consideration