11(1)The merger method of accounting is as follows.
(2)The assets and liabilities of the undertaking acquired shall be brought into the group accounts at the figures at which they stand in the undertaking’s accounts, subject to any adjustment authorised or required by this Schedule.
(3)The income and expenditure of the undertaking acquired shall be included in the group accounts for the entire financial year, including the period before the acquisition.
(4)The group accounts shall show corresponding amounts relating to the previous financial year as if the undertaking acquired had been included in the consolidation throughout that year.
(5)There shall be set off against the aggregate of—
(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,
the nominal value of the issued share capital of the undertaking acquired held by the parent company and its subsidiary undertakings.
(6)The resulting amount shall be shown as an adjustment to the consolidated reserves.
(7)In sub-paragraph (5)(a) “” 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.