Case: In an amalgamation in the nature of purchase, the transferor company had an Export Profit Reserve of ₹4,00,000 that must be preserved for some years under applicable law. Under AS 14, how is this dealt with in the transferee's books?

Correct answer: B) Credit Export Profit Reserve and debit Amalgamation Adjustment Reserve by ₹4,00,000

Explanation

Under the purchase method, the transferor's reserves are generally not carried forward, but statutory reserves must be preserved. AS 14 requires such statutory reserves to be recorded in the transferee's books by crediting the respective reserve and debiting the Amalgamation Adjustment Reserve. When the statutory requirement no longer applies, the entry is reversed.