Reorganization in the form of a merger: what to do as an accountant

Initial stage of merger

A merger is a form of reorganization in which several companies cease to exist as separate legal entities and merge into one, larger organization.
The sequence of steps that must be taken in the first stage of a merger is the same as in other forms of reorganization. We have listed all the necessary steps in the table.

Actions to be taken at the initial stage of the merger

Which form should I choose?

Two similar forms of reorganization are affiliation and merger, however, despite many common features, they also have significant differences.

Therefore, the choice between them largely depends on the characteristics and characteristics of specific enterprises.

Merger is the only form of reorganization, as a result of which information about the new enterprise is not entered into the Unified State Register of Legal Entities.

On the contrary, one or more legal entities are deregistered.

In this case, all property and debts as a result of the closure of the LLC through a merger of enterprises are transferred to the legal successor, whose organizational and legal form does not change.

Another feature of the merger is the fact that to carry it out you do not need to obtain a certificate of absence of debts from the Pension Fund.

Often, it is the absence of this document that is the basis for refusal of reorganization.

As for the merger of two companies into one, as a result of this procedure all participants are liquidated, and on their basis a new enterprise arises, with completely different registration data.

It brings together all the assets of predecessors and allows you to start a new activity more efficiently, with more opportunities.

In general, the merger procedure is easier than merging an LLC. However, the first form may violate the rights of participants, while the second provides the most equal opportunities for all reorganized enterprises.

Transfer deed

The next step is preparing the transfer deed. Each company participating in the merger must draw up this document. The date of the transfer deed can be any. But it is better that it coincides with the end of the quarter or year - as stated in paragraph 6 of the Instructions for the formation of accounting records during reorganization *.

The transfer deed must contain provisions on legal succession (Article 59 of the Civil Code of the Russian Federation). This is information about the amounts of receivables and payables, as well as about the property transferred to the newly created company. The value of the property under the transfer deed can be market, residual, initial, or corresponding to the actual cost of inventories (clause 7 of the Instructions for the formation of accounting records during reorganization).

There are no restrictions on the form of the transfer deed. Most often, it is drawn up in the form of an ordinary balance sheet and transcripts are attached for each of the lines. Inventory sheets can be used as transcripts. There is another option: abandon the balance sheet form, and simply list all types of assets and liabilities (fixed assets, intangible assets, “debtor”, “creditor”, etc.) and indicate their value. And in separate appendices, provide lists of objects, debtors, etc. (example examples of the transfer deed can be downloaded here or here).

Required documents

The list of documents required for reorganization by merging can be divided into two groups:

1. Documents that enterprises prepare before reorganization. These include: Application form P12001, which must be certified by a notary. This document indicates the form of reorganization, the number of participants in the procedure, as well as the number of enterprises that will be formed after completion of the procedure (in this case, one).
2. The charter of the new enterprise, which must be developed and approved at the stage of the meeting of owners. are submitted to the registration authority , one of which is then returned. There are general requirements for the registration of the charter: it must be stitched and numbered.
3. The transfer act is a mandatory document during a merger, and all enterprises participating in the reorganization must draw it up. The act must contain information about the amounts of accounts payable and receivable, as well as the amount of property that is transferred from each company to the new company. There is no established form for this document; it can be drawn up in the form of a regular balance sheet or by simply listing all assets.
4. Permission from the Antimonopoly Committee. This document is required only if the total assets of the enterprises or proceeds from sales exceed the legally established limit.
5. Documents confirming notification of creditors. These may be receipts for payment of letters sent to them, as well as copies of the pages of the Bulletin.
6. The merger agreement signed by the participants at the general meeting. This document defines the conditions and rules for the reorganization, as well as the procedure for exchanging shares of old enterprises for new ones.
7. Minutes of the joint meeting of enterprise owners.
8. A certificate from the Pension Fund of Russia confirming the absence of debts, which must be received by each participating enterprise.
9. Receipt of payment of the state duty (its amount is 4,000 rubles).

• Documents that must be obtained as a result of the reorganization. These papers are issued by the tax office: charter of LLC merger;
• documents on deregistration of enterprises;
• state registration certificate;
• documents on tax registration of a new company;
• extract from the Unified State Register of Legal Entities.

These papers must be issued within five days after submitting the first package of documents.

After this, the new enterprise can begin its work in accordance with the chosen type of activity and available capabilities. Read more about changing the types of LLC activities here.

Period until completion of merger

Then you need to prepare documents for the reorganization. This is a deed of transfer, an application for registration of a company created by merger, a decision on reorganization, a document on payment of state duty, etc. The full list is given in paragraph 1 of Article 14 of Federal Law No. 129-FZ dated 08.08.01.

The package of documents should be brought to the “registering” Federal Tax Service and wait until the inspectors make an entry in the Unified State Register of Legal Entities. With the advent of this entry, the predecessor companies will cease to exist, and a new successor organization will appear in their place. But until the waiting period is completed, the predecessors continue to work: they calculate wages, depreciation, register the “primary”, etc.

New York Central and Pennsylvania Railroad

When: February 1, 1968

The Pennsylvania and New York Central Railroad were powerful titans in their respective businesses, with roots dating back to the 19th century.

Despite their rivalry, in 1962 they filed a statement of influence that would result in a single company becoming the sixth largest corporation in America.

By the time the deal was approved in 1968, travel trends themselves had changed. People began to use highways and airplanes more often than rail transport.

In addition, strict legislation also played a role. All this led to the collapse of the new company, whose value reached $4.6 billion. Two years later, the new company declared bankruptcy.

Final financial statements of predecessor companies

Each company participating in the merger must prepare final financial statements as of the date preceding the date of entry into the Unified State Register of Legal Entities about the reorganization. The statements consist of a balance sheet, profit and loss account, statements of changes in equity and cash flows, an explanation and an auditor's report (if the company is subject to statutory audit).

The final accounting statements must reflect transactions performed during the period from the signing of the transfer deed to the closure of the predecessor organization. Because of these transactions, the indicators in the final balance sheet will not coincide with the indicators in the transfer act.

In addition, each predecessor company must close account 99 “Profit and Loss”. Profits can be distributed according to the decision of the founders.

After the final reporting, predecessors do not have to submit balance sheets and other documents, since the last reporting period for them is the time from the beginning of the year to the date of merger.

AMD teams up with Xilinx

Another major deal in the high technology sector. At the end of October, processor manufacturer AMD, the main competitor of Intel , which has recently gradually turned from catching up to leading, announced the acquisition of Xilinx, the largest American manufacturer of programmable logic integrated circuits. The transaction value was $35 billion, and the total capitalization of the combined corporation now reaches $135 billion. After the completion of the transaction (already in 2021), the corporation will be headed by AMD CEO Lisa Su.

Inaugural reporting of a newly created organization

An organization created as a result of a merger must draw up introductory financial statements as of the date on which an entry about the reorganization is made in the Unified State Register of Legal Entities. The lines of the opening balance will contain the sum of the corresponding indicators of the closing balances of predecessors. The exception is mutual settlements between predecessors - for example, when one of them was a borrower and the other a lender. Such indicators are not summed up, since if the debtor and creditor coincide, the obligation terminates. Also, in the introductory statements of the assignee, there is no need to summarize the data from the profit and loss statements of the reorganized companies.

Particular attention should be paid to the authorized capital of the successor organization. If it is less than the amount of capital of predecessors, then the difference is reflected in the balance sheet in the line “Retained earnings (uncovered loss).” If the legal successor’s capital is greater than the amount of capital before the reorganization, such a difference does not need to be shown in the balance sheet. In both cases, the accountant does not make any entries.

The introductory report must be submitted to the Federal Tax Service either immediately after registration or at the end of the current quarter - depending on what is more convenient for your inspector.

Mattel and Learning Company

When: 1998 Cost: $4.2 billion

Mattel is famous for making toys and has been doing so for decades. By 1998, the company decided to try its hand at making high-tech toys and game programs.

To do this, she decided to acquire The Learning Company, which is the manufacturer of the games “Where in the World is Carmen Sandiego?” and “Myst”. The transaction value reached $4.2 billion. Problems began almost immediately, as by the end of the year many of The Learning Company's products were returned by customers.

This resulted in a loss of $206 million in 1999. This seriously undermined Mattel's success.

A year later, Mattel transferred its failed acquisition to Gores Technology Group.

Mattel suffered losses of $430 million.

"Primary" in the transition period

After the merger, the newly created contractual relations of the reorganized legal entities. But the agreements themselves are still concluded on behalf of their predecessors. The question arises: is it necessary to sign additional agreements to replace the parties to the transaction? Or can you simply send information letters to counterparties that indicate the name and details of the successor company?

We believe that additional agreements are not necessary, because all the rights and obligations of each of the predecessor companies are transferred to the newly created organization under the transfer deed (clause 1 of Article 58 of the Civil Code of the Russian Federation). This also applies to contractual relations. This means that to continue cooperation with suppliers and clients, an extract from the Unified State Register of Legal Entities and a transfer deed are sufficient.

As for invoices, certificates of work performed and invoices, before the date of merger they are issued on behalf of predecessors, on the date of merger and further - on behalf of the successor.

HP → Compaq (2001), $33.6 billion

Transaction values ​​are recalculated at 2015 exchange rates.
This deal was met with great skepticism from experts and investors. Many, including the founding families, called the Compaq purchase a costly mistake and tried to prevent it from being completed.

Carly Fiorina, then the director of Hewlett-Packard, long defended her views on the takeover. She believed that the deal with Compaq would allow HP to become the largest computer manufacturer in the world and reduce the cost of production, eliminating many of the problems.

At that time, the PC directions of both companies were already feverish. But HP's successful printer business allowed it to maintain its position after the merger. HP still occupies a large market share, but the company's expansion has led to negative consequences. Since 2001, the personal computer market has changed a lot.

Formerly one of the best IT companies, HP is gradually slowing down and risks becoming a relic. Sluggishness, internal conflicts, cuts in research and layoffs of specialists open the way for competitors. To correct the situation, the company decided that it needed to change from within. HP has placed its bets on software and enterprise services.

Who submits declarations for reorganized companies

If possible, predecessor organizations must report all taxes before the merger, that is, before making an entry in the unified state register. But in practice, as a rule, they do not have time to do this. Then, the very next day after the reorganization, inspectors at the place of registration of the predecessor refuse to accept declarations. In this case, all tax reporting will have to be submitted to the newly created organization to its inspectorate. If, after the reorganization, mistakes of the predecessor are discovered, the successor submits a “clarification” for him.

Please note: the deadline for submitting declarations will not be shifted due to the reorganization. For example, for income tax for the year, the successor is required to report no later than March 28 of the following year - both for himself and for each predecessor.

Yandex parted ways with Sberbank

Against this background, Sberbank’s cooperation with Yandex, which at the same time was increasingly becoming its competitor, fell apart completely. And information has appeared before: the heads of Sberbank and Yandex are such different people that it is unclear why they decided to cooperate at all. And in June 2022, the relationship between the companies came to an end. Yandex took full ownership of the Yandex.Market , and Sberbank took over Yandex.Money , which it later renamed YuMoney.

If during a merger the debtor merged with the creditor

It happens that one participant in the merger is a debtor, and the other participant is a creditor. Then, after the reorganization, the creditor and debtor become one, and the debt is automatically repaid. This means that because of the merger, the debtor will not have to repay the debt, and the creditor will not be able to get his money back.

Is the debtor obliged to show income on the date of reorganization, and the creditor expenses? The Tax Code does not regulate this issue. But officials believe that taxable income does not arise for the debtor. This point of view was expressed by the Russian Ministry of Finance in letters dated July 30, 2010 No. 03-03-06/1/502 and dated November 29, 2010 No. 03-03-06/1/744. True, they talk about reorganization in the form of annexation. But, in our opinion, the conclusions are also applicable in the case of a merger.

In addition, similar conclusions can be drawn regarding the lender's costs. In other words, as of the merger date, the creditor may not include the extinguished debt as an expense.

A special case is the situation when a merger involves a supplier and a buyer who, before the reorganization, transferred an advance to the supplier. In such circumstances, the seller has the right, before reorganization, to deduct the VAT previously accrued on the prepayment. The buyer, on the contrary, is obliged to restore the tax previously accepted for deduction when transferring the advance payment. The same position is given in the letter of the Ministry of Finance of Russia dated September 25, 2009 No. 03-07-11/242. Although the letter refers to affiliation, it can also be used as a guide in the event of a merger.

Dell → EMC (2015), $67 billion

This week, Dell and EMC officially announced their impending merger, which will become the largest in the history of the IT industry. Experts believe that there are many reasons why things may not go as planned. The HP example confirms this.

But company leaders are confident that by working together, their already common organization will be able to survive in a rapidly changing market and remain competitive. Analysts note that being a private company will help Dell in this situation. Such major transformations are much more difficult to implement for public organizations.

They produce products that were popular 15 years ago, but now demand is barely growing. Dell and EMC were unable to find anything new for their products or merge to compensate for this problem.

Peter Cohan, Peter S. Cohan & Associates

The acquisition of EMC should strengthen Dell's position in the areas of data storage and processing, networking equipment and server systems. This is especially true now that they have to compete with Amazon, Microsoft and Google.

Tax base for VAT

The newly created company can deduct value added tax that one of its predecessors paid to sellers or at customs, but did not have time to deduct before the merger.

The successor must confirm the right to deduction with an invoice and primary documents for the transaction. It is also necessary that the goods (results of work, services) purchased by the predecessor be registered for use in transactions subject to VAT. There is one more mandatory condition: the predecessor must transfer documents confirming payment (clause 5 of Article 162.1 of the Tax Code of the Russian Federation).

An organization formed as a result of a merger can deduct VAT, which predecessors accrued when receiving an advance. The assignee can do this after the sale of the prepaid goods, or after termination of the transaction and return of the advance payment. There is one limitation here - the deduction must be accepted no later than one year from the date of return (clause 4 of Article 162.1 of the Tax Code of the Russian Federation).

In practice, many problems arise due to the date of invoices issued in the name of predecessors. If the documents are dated after the reorganization, then the inspectors do not allow the deduction to be accepted. In such a situation, the accountant can only contact the suppliers and ask for corrections.

Sberbank bought 2GIS

In June 2022, Sberbank had not yet turned into Sberbank, but was already intensively preparing for this. directory maps of Russian cities since 1999 . At the end of the 2010s, 2GIS was already one of the ten largest Russian Internet companies, and the monthly user audience exceeded 50 million people. The company at the time of the transaction was valued at 14.3 billion rubles. Sberbank received 72% of the shares, another 3% was received by O2O Holding, a joint venture of Sberbank and Mail.ru group.

Sberbank and Mail.ru: divorce and maiden name. What should shareholders expect?

Personal income tax reporting

Reorganization in the form of a merger does not interrupt the personal income tax period. This is explained by the fact that the company is not a taxpayer, but a tax agent, and labor relations with personnel continue (Article 75 of the Labor Code of the Russian Federation). This means that there is no need to submit any interim reporting on personal income tax during reorganization.

There is one important nuance here: if, after the merger, an employee brought a notice for property deduction, where the predecessor organization is indicated as the employer, the accounting department of the successor company must refuse him. The employee will have to go to the tax office again and get another notice confirming the deduction related to the legal successor. Such clarifications were given by the Russian Ministry of Finance in letter dated August 25, 2011 No. 03-04-05/7-599. In practice, inspectors everywhere follow these clarifications and cancel the deduction provided under an “outdated” notification.

Personnel component

With any form of reorganization, the changes that have occurred in the company will affect such an element of the enterprise as personnel. A merger is no exception; some personnel changes will occur in this case as well.

What will happen to employees when organizations merge by joining?

It is worth highlighting several rules for reorganization that directly affect employees:

1. None of the forms of enterprise reorganization provide for the dismissal of employees. Therefore, such an event cannot be a basis for termination of the employment contract with them (by the employer).
2. Before the reorganization or after completion of the procedure, employees have the right to resign, indicating as a reason such a reason as a change in the owner of the enterprise or its legal form.
3. Before the merger, employers are not required to notify staff of upcoming changes, however, after the procedure is completed, it is better to do this (in writing).
4. In an organization that is formed as a result of the reorganization of a legal entity by merger, a new staffing table must be adopted. Duplication of responsibilities is also inevitable, so some employees may be transferred to new positions or dismissed due to staff reductions.
5. In case of changes in working conditions, additional annexes to the employment contract must be accepted and signed and appropriate entries must be made in the employees’ work books.

Obviously, in most cases, layoffs are inevitable anyway. According to the labor code, it is impossible to dismiss employees due to the reorganization of structural divisions through a merger, however, after completion of the procedure, the management of the new enterprise will be able to legally reduce staff.

General steps for processing and registering changes in passport data

We suggest you read about how to formalize and register a change in the passport data of a director or founder, about the procedure for changing the founder of an enterprise or the name of an LLC, as well as about making changes to the OKVED IP, to the constituent documents. The site also contains materials about the reorganization of a closed joint stock company into an LLC and the division of an LLC into two LLCs.

Insurance premiums and reporting to funds

One of the most controversial issues arising in connection with a merger is this: should the newly created organization calculate the taxable base for insurance premiums from scratch? Or does it have the right to continue the countdown begun by its predecessors before the reorganization?

The amount of contributions directly depends on the answer. If the assignee resets the base, he will automatically lose the right to exempt accruals from contributions that exceed the maximum amount (in 2011 it is equal to 463,000 rubles). If he “inherits” the base, then along with it he will receive the right not to charge contributions for the excess amount.

In our opinion, when reorganizing in the form of a merger, the successor company must begin anew to determine the base for contributions. This is explained by the fact that for an organization created after January 1, the first billing period is the time from the date of creation to December 31 (Part 3 of Article 10 of the Federal Law of July 24, 2009 No. 212-FZ). At the same time, there are no provisions in this law that would talk about the transfer of the base “by inheritance” in this law.

If the predecessors did not pay fees or report to the funds before the merger, the successor will have to do this. This obligation is enshrined in Part 16 of Article 15 of Federal Law No. 212-FZ.

* Guidelines for the preparation of financial statements during the reorganization of organizations were approved by order of the Ministry of Finance of Russia dated May 20, 2003 No. 44n.

Yandex did not buy Tinkoff

This deal did not take place, but it is impossible not to mention it. Negotiations between the Russian Internet giant and TCS Group, which owns Tinkoff Bank, ended in nothing, or rather, in mutual accusations. Yandex really wanted to acquire a financial partner to replace the departed Sberbank , but Oleg Tinkov ultimately did not agree with the terms of the deal, calling it a takeover (we will not mention what the businessman called Yandex himself).

Experts: is it worth selling Yandex shares right now?

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HP and Autonomy

When: October 2011 Cost: $11.1 billion

A year after the acquisition in 2012, it was revealed that Autonomy had falsified its numbers and was also significantly overvalued at the time of the acquisition deal.

The HP director was fired in 2011 for mistakes he made that led to massive losses.

The purchase of the company did not bring anything good.

Arby's and Wendy's

When: September 29, 2008 Cost: $2.34 billion

Wendy's was never able to overtake its competitor McDonald's to become the most popular fast food chain in the country.

However, the merger with Arby's in 2008 was supposed to strengthen their position.

However, their joint efforts could not lead to any significant results.

Three years later, Wendy's/Arby's Group sold Arby's assets to privately held Roark.

Zynga and OMGPOP

When: March 21, 2012 Cost: $210 million

Zynga, the maker of Farmville, Mafia Wars and dozens of other popular games, paid $210 million to acquire OMGPOP, the maker of DrawSomething!, a viral game for iOS and Android.

However, the game sharply lost its popularity, and the number of users dropped from 15 million per day to 10 million in the first month alone.

It also felt like Zynga didn't have a plan to deal with the acquired company.

As a result, Zynga laid off 18% of its staff, including some staff from OMGPOP, and closed three OMGPOP offices.

Acquisition of organizations: legal, accounting and tax aspects

E. SOROKINA LLC "Accounting Service Center "Balance PLUS"

One way to reorganize an organization is to merge one company with another (absorption). The merging company is liquidated, and the assets, property, rights and obligations of the liquidated company are transferred to the legal successor. The legal successor pays not only for previous obligations, but also for the obligations of the acquired company. The merging company is considered reorganized from the moment an entry on the termination of the activities of the merging organization is made in the Unified State Register of Legal Entities (USRLE).

The merger of a company is the termination of one or more companies with the transfer of all their rights and obligations to another company. The general meeting of participants of each company participating in the reorganization in the form of merger makes a decision on such reorganization, on approval of the merger agreement, and the general meeting of participants of the acquired company also makes a decision on approval of the transfer act. The joint general meeting of participants of the companies participating in the merger makes changes to the constituent documents of the company to which the merger is being carried out, changes related to the composition of the company's participants, determining the size of their shares, other changes provided for by the merger agreement, and also, if necessary, resolves other issues, including the election of bodies of the company to which the merger is being carried out. The timing and procedure for holding such a general meeting are determined by the accession agreement.

When one company merges with another, all rights and obligations of the merged company are transferred to the latter in accordance with the transfer act. When a legal entity is reorganized in the form of the merger of another legal entity, the first of them is considered reorganized from the moment an entry is made in the Unified State Register of Legal Entities about the termination of the activities of the affiliated legal entity (Clause 4, Article 57 of the Civil Code of the Russian Federation).

There are several types of absorption.

In the direction of associations:

• horizontal integration - the union of companies that produce the same product or carry out the same stages of production, for example, two manufacturers of the same product or two retailers;
• vertical integration is the association of enterprises of the same field of activity, but participating in different stages of the technological chain, connected by cooperation. Direct integration is aimed at penetrating sales markets, reverse integration is aimed at gaining access to sources of raw materials and components.

By type of connections:

• a generic association covers interrelated enterprises of the same industry;
• a conglomerate association is associated with the purchase of assets of companies that belong to different industries and do not have technological unity or production commonality; Conglomerates are created for the purpose of subsequent resale of assets at a higher price or for business diversification.

By the nature of the association:

• hostile or friendly;
• union of equals or “eating” the weak.

By purpose:

• production - expanding production capacities and increasing their utilization, improving technology and organization of production processes;
• commercial - increasing market share, control (regulation) of sales and supplies;
• financial - centralization of financial policy, strengthening positions in the securities market, ensuring company transparency, expanding financing opportunities, saving on tax payments;
• investment - the possibility of investing in promising assets, modernizing production, monitoring the effectiveness and risk of investments.

Formation of accounting and reporting indicators during reorganization in the form of merger

The formation in accounting of information and indicators of financial statements on reorganization in the form of merger is regulated by the Methodological Guidelines for the formation of financial statements when carrying out the reorganization of organizations, approved by Order of the Ministry of Finance of Russia dated May 20, 2003 No. 44n (hereinafter referred to as the Guidelines).

To prepare financial statements during reorganization in the form of merger, the accountant must have the following documents:

• constituent documents of a legal entity, which was joined by another legal entity;
• decision of the founders to join;
• accession agreement;
• transfer act, which may include financial statements, acts (inventory) of inventory of property and liabilities, primary accounting documents for material assets, transcripts of accounts payable and receivable, etc.;
• certificate of termination of the activity of the last of the affiliated organizations in the Unified State Register of Legal Entities.
• The date of approval of the transfer act is determined by the founders within the reorganization period provided for in the agreement on the founders’ decision to join, taking into account the following procedures:
• notification of creditors (shareholders, participants) about the decision made on reorganization in the form of merger and their submission of demands for termination or early fulfillment of obligations and compensation for losses;
• inventory of property and liabilities, etc.

It is recommended that the transfer act be drawn up at the end of the reporting period or the date of preparation of interim financial statements (quarter, month), which is the basis for characterizing and assessing the transferred property and liabilities of the reorganized organization.
Property and liabilities in accordance with the Methodological Instructions are assessed according to the following rules:

• the transferred property can be valued by decision of the founders at the residual, current market or other value (actual cost of inventories, initial cost of financial investments, etc.), while the value of the property reflected in the transfer act must coincide with the data given in the appendices (inventory, transcripts) to the transfer deed;
• the assessment of the obligations of the acquiring organization in the transfer act is reflected in the amount for which the accounts payable were reflected in the accounting records, taking into account the amounts of losses due for compensation;
• shares of joint-stock companies subject to redemption in the authorized capital of the organization, at the request of shareholders, are valued not lower than their current market value;
• when canceling the own shares purchased by the merging organization after completing all the prescribed procedures, the nominal value of the shares is reflected in the accounting records as a decrease in the authorized capital; the resulting difference between the actual costs of repurchasing shares and their nominal value is included in the financial results of the reorganized organization as operating income (expenses);
• The assignee expresses data on the received fixed assets, profitable investments in tangible assets and intangible assets in the assessment according to which they are reflected in the transfer act, taking into account the numerical indicators of the final accounting statements of the organization compiled by the acquiring organization.

According to clause 11 of the Methodological Instructions, the transfer of property and liabilities during reorganization under a transfer deed from one organization to another in the manner of universal succession is not considered for accounting purposes as a sale of property and liabilities or as a gratuitous transfer of them, which is not reflected in accounting records.
Preparation of final financial statements by the merging organization

In case of reorganization in the form of merger, the final financial statements are prepared only by the merging organization on the day preceding the entry into the Unified State Register of Legal Entities about the termination of its activities. In this case, the profit and loss account is closed and the amount of net profit of the merging organization is distributed (directed for certain purposes) on the basis of the agreement on the merger of the founders. If an organization, when another organization joins it, changes only the volume of property and liabilities and the current reporting year is not interrupted, then it does not close the profit and loss account in the financial statements and does not generate final accounting statements as of the date of state registration of the termination of the activities of the acquired organization.

Until the date of entry into the Unified State Register of Legal Entities about the termination of the activities of the merging organization during reorganization in the form of affiliation, all operations related to its current activities, as well as expenses in connection with the reorganization incurred during the period from the date of approval of the transfer act, are reflected in the accounting records of the merging organization.

For example, the following are subject to reflection:

• sale of inventory items;
• settlements with creditors;
• depreciation calculation on transferred property;
• calculating wages to employees;
• settlements of taxes and fees with the corresponding budgets and mandatory payments to state extra-budgetary funds;
• write-off of future expenses that are not subject to inclusion in the transfer act (for example, for the acquisition of a license to carry out activities, the rights to which are not subject to transfer by succession).

Preparation of the opening financial statements of the legal successor
The financial statements of the legal successor as of the date of entry into the Unified State Register of Legal Entities on the termination of the activity of the last of the merged organizations is formed by line-by-line combination (summing or subtracting in case of uncovered losses of previous years) numerical indicators of the final financial statements of the merging organization, taking into account the numerical indicators of the financial statements of the legal successor, drawn up on the date of state registration of termination of the activities of the merging organization, with the exception of:

• numerical indicators reflecting mutual receivables and payables between reorganized organizations, including calculations of dividends;
• financial investments of some reorganized organizations in the authorized capitals of other reorganized organizations;
• other assets and liabilities characterizing mutual settlements of reorganized organizations, including profits and losses as a result of mutual transactions.

In this case, the numerical indicators of the profit and loss statements of the successor and the merging organization for the reporting periods before the date of state registration of the termination of the activities of the merging organization are not summed up.
However, from this date, the income and expenses of the affiliated organization are reflected in the income statement of the successor. Formation of authorized capital

As of the date of entry into the Unified State Register of Legal Entities about the termination of the activities of the last of the merged organizations in accordance with the merger agreement, the formed authorized capital is reflected. This agreement may provide for its increase or decrease.

When the authorized capital of the legal successor increases in comparison with the amount of authorized capital of the reorganized organizations, including at the expense of the own sources of organizations participating in the reorganization in the form of merger (additional capital, retained earnings, etc.), as of the date of entry into the Unified State Register of Legal Entities on the termination of activities The legal successor of the last of the merged organizations reflects the amount of the authorized capital fixed in the merger agreement.

If the authorized capital of the legal successor is reduced in comparison with the amount of authorized capital of the reorganized organizations, the financial statements of the legal successor on the date of entry into the Unified State Register of Legal Entities on the termination of the activity of the last of the merged organizations shall reflect the amount of the authorized capital fixed in the merger agreement, and the difference is subject to settlement in the balance sheet of the legal successor in section “Capital and reserves” with the numerical indicator “Retained earnings (uncovered loss)”.

The amount of the authorized capital may not coincide with the value of the net assets of the legal successor. In this case, the numerical indicators of the section “Capital and Reserves” of the balance sheet of the legal successor as of the date of making a record in the Unified State Register of Legal Entities on the termination of the activities of the last of the merged organizations are formed in the following order. If the value of net assets during the conversion of shares exceeds the value of the authorized capital, numerical indicators are formed in the amount of the value of net assets, divided into authorized and additional capital (the excess of the value of net assets over the total par value of the shares). In other cases, the difference is regulated by the numerical indicator “Retained earnings (uncovered loss)”. In all cases of formation of the “Capital and Reserves” section, no accounting entries are made.

Example. As a result of the reorganization of the LLC, the value of net assets amounted to 140,000 rubles, while in accordance with the merger agreement, the authorized capital should be 100,000 rubles. The line “Authorized capital” reflects the amount of 100,000 rubles, the line “Retained earnings (uncovered loss)” - 40,000 rubles. (140,000 - 100,000).

Responsibility for tax obligations

The obligation to pay taxes of a reorganized legal entity is fulfilled by its legal successor in the manner established by Art. 50 Civil Code of the Russian Federation.

The transfer deed must indicate the amount of unpaid taxes and fees. In this case, the legal successor must pay the following obligations:

• identified before the completion of the reorganization and specified in the transfer act (including taxes, fees, penalties and fines for violation of tax laws);
• for taxes and fees identified by inspectors after the completion of the reorganization, as well as penalties for their late payment.

After reorganization by merger, tax authorities do not have the right to require the successor to pay fines imposed after its completion.
But fines are a small part of tax liabilities. Tax authorities collect more significant amounts for obligations related to the payment of taxes and penalties. The taxpayer must fulfill them regardless of when the fact of underpayment of taxes is established: before or after the completion of the reorganization. Therefore, before proceeding with the reorganization, it is necessary to conduct an inventory of the companies’ tax liabilities, and only for the period that is available for inspection by the tax authorities (the three previous calendar years and the current year).

income tax. When a company is reorganized, taxpayer-shareholders do not generate a profit (loss) taken into account for tax purposes (clause 3 of Article 277 of the Tax Code of the Russian Federation). This rule allows you not to include:

• in income the positive value of the net assets of the merged company;
• expenses include the negative value of the net assets of the acquired company;
• in the income of the successor the difference between the market valuation of the assets of the merged company and the paid value of its shares, and if the specified difference is negative, do not include it in expenses.

If the acquiring organization is the legal successor of the merged enterprise in all transactions concluded before the reorganization, then the value of the property at which it was accepted for tax accounting by the reorganized legal entity will not change.
The loss from the redemption of shares of the acquiring organization is not taken into account by the acquiring organization when taxing profits. The value of shares and other property for tax accounting purposes is determined by the successor based on the actual costs of its acquisition. When reorganizing in the form of merger of a legal entity with another legal entity (legal successor), the calculation and payment of corporate income tax are carried out by the latter (legal successor) in the generally established manner based on consolidated (including data from affiliated organizations) accounting records for the first quarter, half of the year, 9 months, reporting year (see letter of the Ministry of Finance of Russia dated January 20, 2005 No. 03-03-01-04/1/14). According to paragraph 5 of paragraph 2 of Art. 286 of the Tax Code of the Russian Federation, the amount of the monthly advance payment payable in the fourth quarter of the current tax period is taken to be equal to one third of the difference between the amount of the advance payment calculated based on the results of 9 months and the amount of the advance payment calculated based on the results of the six months.

In this case, the amount of advance payments calculated based on the results of 9 months and the amount of advance payment calculated based on the results of half a year are determined by the successor as the amount of advance payments calculated by the affiliated companies and joint-stock companies before the reorganization based on the results of 9 months and half a year, respectively.

Example. The legal entity, as a result of reorganization in the form of merger with another legal entity, ceased operations on March 31, 2003 and, based on the results of the first quarter of 2003, received a loss in the amount of 200 thousand rubles, calculated in accordance with the provisions of Chapter 25 of the Tax Code of the Russian Federation. According to paragraph 3 of Art. 55 of the Tax Code of the Russian Federation, the last tax period for the acquired legal entity is the first quarter of 2003. In accordance with clause 8 of Art. 274 of the Tax Code of the Russian Federation, if in a tax period the taxpayer received a loss (in the case under consideration - for the first quarter of 2003), then in this tax period the tax base is recognized as equal to zero. For the first quarter of 2003, the successor organization received taxable profit in the amount of 700 thousand rubles. and must pay income tax to the budget for the first quarter of 2003 in the amount of 168 thousand rubles. (700 thousand rubles x 24%). The successor organization, starting from January 1, 2004 (for taxable profit), has the right to claim a benefit in the amount of the loss received by the affiliated legal entity for the first quarter of 2003 in the amount of 200 thousand rubles, in the manner and under the conditions provided for in Art. 283 Tax Code of the Russian Federation.

VAT. The transfer of the organization's property to its legal successor during reorganization is not recognized as a sale, therefore it is not subject to VAT (clause 3 of Article 39 of the Tax Code of the Russian Federation). If an organization uses property in transactions not subject to VAT, it must restore the amounts of VAT previously accepted for deduction. Moreover, for depreciable property, only that part of the tax that falls on the residual value of the property needs to be restored.

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Microsoft and Danger Inc.

When: April 15, 2008 Cost: $500 million

When the company Danger Inc, which worked in the field of mobile phone development, was created, it seemed to be a real leader, since directors of companies such as Apple, Phillips and WebTV took part in its creation.

In 2008, Microsoft bought the company, but the exact amount of the deal was not disclosed. According to rumors, it is about $500 million.

All Danger employees were transferred to the Mobile Communications Business division to work on the platform.

In October 2009, one of the Danger data centers, which stored users’ personal data, suffered a major malfunction. It took 2 months to recover.

Meanwhile, a new mobile phone called Microsoft KIN entered the market. This phone was not a success and became one of many failures on the corporation's list.

AOL and Time Warner

When: February 11, 2000 Cost: $164 billion

The $164 billion deal to merge Time Warner and AOL combined the old and new companies into a potentially powerful new company.

However, behind the scenes the situation was not so promising. The dot-com bubble burst, cultural differences hindered collaboration, and the market situation was changing.

In 2003, the new company announced $45 billion in asset write-downs followed by $100 billion in losses.

Bank of America and Countrywide

When: July 1, 2008 Cost: $4.1 billion

For financial giant Bank of America, its $4 billion acquisition of mortgage lender Countrywide in 2008 seemed like a natural way to expand its business.

The housing bubble that year backfired and resulted in huge losses for Countrywide, totaling nearly $40 billion.

Cisco and Linksys

When: March 20, 2003 Cost: $500 million

When Cisco acquired Linksys in 2003 for $500 million, it seemed like a natural fit.

Cisco wanted to expand, and Linksys wanted to sell its products to small businesses and residential customers.

This plan could have worked if the market in which Linksys operated had not been quickly saturated by competitors (Netgear, D-Link, etc.).

Under Cisco management, the quality of Linksys products has decreased.

In 2013, Cisco decided to cut losses in its consumer products division and sold Linksys.

Sears and Kmart

When: March 24, 2005 Cost: $11 billion

If you have a powerful brand, it is often difficult to notice how times are changing. In the early 2000s. Retailers Sears and Kmart began to lose ground to competitors Walmart and Target, and Kmart eventually declared bankruptcy in 2002.

Then in 2005, Eddie Lampert of the hedge fund that controls Kmart saw an opportunity for Sears to merge with Kmart and create Sears Holdings.

At that time, Sears had already begun purchasing Super Kmart locations, and the merger helped the company in this matter.

In addition, it was assumed that companies would exchange brands and achieve profits by combining supply chains and administrative management.

Before the merger there were many expectations and hopes, but the reality turned out to be cruel. In 2014 and 2015 significant portions of Sears' assets were sold off.

Sears tried to achieve success with an innovation lab to renew and modernize the brand, while Kmart continued to show losses.

In 2011, 100 outlets were closed, and in 2016, another 68 outlets were closed.

Microsoft and Nokia

When: April 25, 2014 Cost: $7.9 billion

In 2013 Microsoft CEO Steve Ballmer saw opportunity in the acquisition of Nokia, the Finnish mobile phone maker.

The deal was completed in 2014, but this acquisition very quickly showed its inconsistency.

Ballmer left Microsoft that same year, and the company's new CEO, Satya Nadella, was forced to undertake major efforts to restructure the company, including laying off nearly 15,000 employees.

Myspace and News Corp

When: July 2005 Cost: $580 million

Before Facebook there was Myspace. In 2006, it was the most visited website in the United States. Such popularity forced Rupert Murdoch and his News Corp to come to the conclusion that it was worth spending $580 million to purchase this social network.

For a short period of time, this deal seemed very profitable, and the market capitalization of the social network in 2007 reached $12 billion. However, after that the situation began to worsen due to mistakes made.

As of 2009, Facebook had overtaken Myspace in terms of unique visitors, and in April 2011, Myspace had dropped to 40K monthly visitors while Facebook achieved a record of 150K+.

Specific Media and Justin Timberlake acquired the social network in 2011 for $35 million.

eBay and Skype

Date: September 2005 Cost: $2.6 billion

When eBay acquired Skype for $2.6 billion in 2005, it was assumed that advances in communication technology would lead to better connections between buyers and sellers.

However, the results were less impressive because buyers and sellers had little reason to communicate in any way other than by email, as in the past.

In addition, eBay changed the Skype management team several times during the year, but the results were disastrous, and the company had to sell 65% of Skype for $1.9 billion.

Cisco and Pure Digital

When: May 21, 2009 Cost: $590 million

When Cisco paid nearly $600 million for Pure Digital in 2009, it seemed like a great investment.

The Flip HD digital camera was the hottest product on the market at the time.

Unfortunately, the time has come when high-resolution digital cameras have become commonplace for any smartphone.

In 2011, Cisco shut down production of the Flip.

Daimler-Benz and Chrysler

When: November 12, 1998 Cost: $36 billion

The merger of two famous brands in the automotive industry in 1998 seemed like a great idea.

Daimler made a big bet on the merger, paying $36 billion to merge with Chrysler. However, other people took over and created many problems for the merged company.

As a result of the retirement of Chrysler chief Bob Eaton, primary control powers passed to Daimler. However, other high-ranking Chrysler directors, including the president and vice chairman, were soon forced to leave.

All control of the company passed to Daimler, after which the company began investing heavily in Chrysler. However, language and cultural differences meant that Chrysler's new product launches were unsuccessful, causing the company to lose market share.

The recession and falling sales led to the collapse of this promising alliance. In 2007, Daimler sold 80% of Chrysler to Cerberus Capital Management for $7 billion.