ABSTRACT
But where two (or more) sets of shareholders continue their interests on a combined basis, such business combinations must use ‘merger accounting’ [FRS 6] if, but only if, they meet each of the following criteria:
1 No party is portrayed as either ‘acquirer’ or ‘acquired’. 2 All parties join in managing the new combined entity. 3 No party dominates the new combined entity by virtue of its relative size (more
than 50 per cent larger than each other party). 4 Each party’s equity shareholders receive mainly equity shares in the new
combined entity (not cash or loan stock). 5 No equity shareholders of any of the combining entities retain any material
interest in the future performance of only part of the new combined entity.
