BMC Associates says Replied on 12th September,2026 04:10 PM

A reverse acquisition happens when the entity that legally issues shares (the legal acquirer) is identified as the accounting acquiree, while the entity whose shareholders receive control is the accounting acquirer. For example, suppose Company B legally acquires Company A by issuing its shares to A's shareholders. If, after the transaction, the former shareholders of A obtain control of B, then: B = legal acquirer but accounting acquiree A = legal acquiree but accounting acquirer The transaction is therefore a reverse acquisition. How is consideration calculated? In a reverse acquisition, the accounting consideration is generally determined by looking at the number and type of equity interests that the accounting acquirer (A) would have had to issue to give the owners of the accounting acquiree (B) the same percentage of ownership in the combined entity that they actually have after the transaction. In simple terms: Consideration = Fair value of the hypothetical shares that A would have issued to B's shareholders. The calculation can be illustrated as: If B's shareholders own 30% of the combined entity after the transaction, determine how many shares A would theoretically have needed to issue to give B's shareholders that same 30% interest. The fair value of those hypothetical shares represents the consideration. The exact calculation depends on the share-exchange ratio, ownership percentages, and fair values available at the acquisition date. For such complex accounting matters, businesses may consult chartered accountant firms in gurgaon, a chartered accountant gurgaon, a ca firm in gurgaon, or a ca in gurgaon.