diff --git a/mercurial/merge.py b/mercurial/merge.py
--- a/mercurial/merge.py
+++ b/mercurial/merge.py
@@ -340,7 +340,7 @@ def _checkcollision(repo, wmf, actions):
             pmmf.discard(f)
         pmmf.add(fd)
     def mergeop(f, args):
-        f2, fd, move = args
+        f2, fa, fd, move = args
         if move:
             pmmf.discard(f)
         pmmf.add(fd)
@@ -468,7 +468,7 @@ def manifestmerge(repo, wctx, p2, pa, br
             elif nol and n1 == a: # local only changed 'x'
                 actions.append((f, "g", (fl1,), "remote is newer"))
             else: # both changed something
-                actions.append((f, "m", (f, f, False), "versions differ"))
+                actions.append((f, "m", (f, fa, f, False), "versions differ"))
         elif f in copied: # files we'll deal with on m2 side
             pass
         elif n1 and f in movewithdir: # directory rename
@@ -477,7 +477,7 @@ def manifestmerge(repo, wctx, p2, pa, br
                             "remote renamed directory to " + f2))
         elif n1 and f in copy:
             f2 = copy[f]
-            actions.append((f, "m", (f2, f, False),
+            actions.append((f, "m", (f2, f2, f, False),
                             "local copied/moved to " + f2))
         elif n1 and f in ma: # clean, a different, no remote
             if n1 != ma[f]:
@@ -496,10 +496,10 @@ def manifestmerge(repo, wctx, p2, pa, br
         elif n2 and f in copy:
             f2 = copy[f]
             if f2 in m2:
-                actions.append((f2, "m", (f, f, False),
+                actions.append((f2, "m", (f, f2, f, False),
                                 "remote copied to " + f))
             else:
-                actions.append((f2, "m", (f, f, True),
+                actions.append((f2, "m", (f, f2, f, True),
                                 "remote moved to " + f))
         elif n2 and f not in ma:
             # local unknown, remote created: the logic is described by the
@@ -519,7 +519,8 @@ def manifestmerge(repo, wctx, p2, pa, br
             else:
                 different = _checkunknownfile(repo, wctx, p2, f)
                 if force and branchmerge and different:
-                    actions.append((f, "m", (f, f, False),
+                    # FIXME: This is wrong - f is not in ma ...
+                    actions.append((f, "m", (f, f, f, False),
                                     "remote differs from untracked local"))
                 elif not force and different:
                     aborts.append((f, "ud"))
@@ -617,7 +618,7 @@ def applyupdates(repo, actions, wctx, mc
         f, m, args, msg = a
         repo.ui.debug(" %s: %s -> %s\n" % (f, msg, m))
         if m == "m": # merge
-            f2, fd, move = args
+            f2, fa, fd, move = args
             if fd == '.hgsubstate': # merged internally
                 continue
             repo.ui.debug("  preserving %s for resolve of %s\n" % (f, fd))
@@ -628,9 +629,9 @@ def applyupdates(repo, actions, wctx, mc
                     fca = fcl.p1()
                 else:
                     fca = repo.filectx(f, fileid=nullrev)
+            elif fa in actx:
+                fca = actx[fa]
             else:
-                fca = fcl.ancestor(fco, actx)
-            if not fca:
                 fca = repo.filectx(f, fileid=nullrev)
             ms.add(fcl, fco, fca, fd)
             if f != fd and move:
@@ -682,7 +683,7 @@ def applyupdates(repo, actions, wctx, mc
         f, m, args, msg = a
         progress(_updating, z + i + 1, item=f, total=numupdates, unit=_files)
         if m == "m": # merge
-            f2, fd, move = args
+            f2, fa, fd, move = args
             if fd == '.hgsubstate': # subrepo states need updating
                 subrepo.submerge(repo, wctx, mctx, wctx.ancestor(mctx),
                                  overwrite)
@@ -792,7 +793,7 @@ def recordupdates(repo, actions, branchm
             else:
                 repo.dirstate.normal(f)
         elif m == "m": # merge
-            f2, fd, move = args
+            f2, fa, fd, move = args
             if branchmerge:
                 # We've done a branch merge, mark this file as merged
                 # so that we properly record the merger later
diff --git a/tests/test-merge-types.t b/tests/test-merge-types.t
--- a/tests/test-merge-types.t
+++ b/tests/test-merge-types.t
@@ -268,6 +268,7 @@ h: l vs l, different
   merging b
   warning: conflicts during merge.
   merging b incomplete! (edit conflicts, then use 'hg resolve --mark')
+  warning: cannot merge flags for c
   merging d
   warning: internal:merge cannot merge symlinks for d
   merging d incomplete! (edit conflicts, then use 'hg resolve --mark')
@@ -328,6 +329,7 @@ h: l vs l, different
   merging b
   warning: conflicts during merge.
   merging b incomplete! (edit conflicts, then use 'hg resolve --mark')
+  warning: cannot merge flags for c
   merging d
   warning: internal:merge cannot merge symlinks for d
   merging d incomplete! (edit conflicts, then use 'hg resolve --mark')
@@ -355,7 +357,7 @@ h: l vs l, different
   2
   >>>>>>> other
   $ tellmeabout c
-  c is a plain file with content:
+  c is an executable file with content:
   x
   $ tellmeabout d
   d is an executable file with content: