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Sir just wanted to confirm this an acquirer would be entitled to the target’s Retained earnings, right? Or does it start afresh, with zero retained earnings?
Effectively they get them because they are taking over the assets.
However in terms of the financial accounts, the share capital and the retained earnings of the target both disappear.
Ya I realised. Because all the questions that I solved based on corporate reconstruction and meeting a debt covenant ratio, used debt, equity and retained earnings. The retained earnings figure of say, first yr under MBO team, was not affected by the latest PAT shown in income statement of older much larger parent company. So, then I realised that the new spun off company or just bought out through MBO team doesn’t benefit from older’s retained earnings, they start off afresh.
Sounds right, sir?
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