§ 326 Page 162, line 6, leave out 'the business of the undertaking as a whole' and insert 'a business of the undertaking'.
§
327 Page 162, line 10, leave out sub-paragraph (4) and insert —
'(4) There shall be set off against the acquisition cost of the interest in the shares of the undertaking held by the parent company and its subsidiary undertakings the interest of the parent company and its subsidiary undertakings in the adjusted capital and reserves of the undertaking acquired.
For this purpose —
the acquisition cost" means the amount of any cash consideration and the fair value of any other consideration, together with such amount (if any) in respect of fees and other expenses of the acquisition as the company may determine, and
the adjusted capital and reserves" of the undertaking acquired means its capital and reserves at the date of the acquisition after adjusting the identifiable assets and liabilities of the undertaking to fair values as at that date.'.
§ (5) There shall be set off against the aggregate of—
1131§ 328 Page 163, line 1, leave out sub-paragraph (5) and insert —
- (a) the appropriate amount in respect of qualifying shares issued by the parent company or its subsidiary undertakings in consideration for the acquisition of shares in the undertaking acquired, and
- (b) the fair value of any other consideration for the acquisition of shares in the undertaking acquired, determined as at the date when those shares were acquired,
§ (6) The resulting amount shall be shown as an adjustment to the consolidated reserves.
§ (7) In sub-paragraph (5)(a) "qualifying shares" means —
- (a) shares in relation to which section 131 (merger relief) applies, in respect of which the appropriate amount is the nominal value; or
- (b) shares in relation to which section 132 (relief in respect of group reconstructions) applies, in respect of which the appropriate amount is the nominal value together with any minimum premium value within the meaning of that section.'.
§
329 Page 163, line 10, at end insert —
'11A. —(1) Where a group is acquired, paragraphs 9 to 11 apply with the following adaptations.
(2) References to shares of the undertakings acquired shall be construed as references to shares of the parent undertaking of the group.
(3) Other references to the undertaking acquired shall be construed as references to the group; and references to the assets and liabilities, income and expenditure and capital and reserves of the undertaking acquired shall be construed as references to the assets and liabilities, income and expenditure and capital and reserves of the group after making the set-offs and other adjustments required by this Schedule in the case of group accounts.'.
§ Lord StrathclydeMy Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 326 to 329. I shall speak also to Amendment No. 455. They fine tune the provisions in Schedule 2 to the Bill which prescribe rules deriving from the Seventh Directive for the accounting treatment of mergers and acquisitions. The changes have been brought forward by the Government following discussions with outside accountants since the Bill last left your Lordships' House and also in response to a valid point made in another place by the honourable Member for Norwich South, Mr. John Garrett.
§ Moved, That the House do agree with the Commons in the said amendments. —(Lord Strathclyde.)
§ Lord Williams of ElvelMy Lords, I am glad that the noble Lord has indicated the Government's debt to my honourable friend in another place. The point that he made was one that I raised at the same time. As the Minister will know, because we had a number of exchanges on the matter in Committee and on Report, merger accounting has been a matter of consistent trouble. We are not completely satisfied that the Government have interpreted the directive in the best possible way. Nevertheless, the Government have given it that interpretation and we have tried to argue that there could be different interpretations. That being so, we must accept that the Government have taken the decision which I do not intend to oppose. However, I believe that it will 1132 give rise to enormous difficulties in practice but perhaps that is the fault of the directive rather than the Government.
§ On Question, Motion agreed to.