Accounting of External Reconstruction (Amalgamation/ Mergers/ Takeovers and Absorption)
Reconstruction involves reorganizing a company’s legal, operational, and ownership structures, including revaluing assets and obligations. External reconstruction occurs when an existing firm enters into liquidation with the sole goal of selling its assets and liabilities to a newly established company that is typically owned and titled similarly.
In the event of external rebuilding, the losses of the old firm cannot be offset by the profits of the new company. It refers to the selling of an existing firm’s business to another company founded specifically for that purpose. External rebuilding involves the liquidation of one firm and the formation of another. This reconstruction occurs when an existing business enters into liquidation with the sole goal of selling its assets and liabilities to a newly established firm that is typically owned and titled similarly.
It refers to the selling of an existing firm’s business to another company founded specifically for that purpose. When a firm has been losing money for many years and is facing a financial crisis, it might sell its assets to a newly established company.
The phrase “External Reconstruction” refers to the process of dissolving an existing corporation and registering a new one based on financial restructuring. When a firm has been losing money for many years and is facing a financial crisis, it might sell its assets to a newly established company. Thus, there are two sides to ‘External Reconstruction’: the dissolution of an existing firm and the restructuring of the company’s financial situation. Actually, the new firm was founded to take over the previous company’s assets and obligations. This method is known as exterior rebuilding. In other words, external reconstruction is the selling of an existing firm’s business to another company founded specifically for that reason.
Types of External Reconstruction are:
- Mergers / Amalgamation
- Acquisition / Takeover
- De-merger
- Reverse Merger
- Application to BIFR (Board of Industrial & Financial Reconstruction)