There may be amalgamations, either by transfer of two or more undertakings to a new company, or to the transfer of one or more companies to an existing company".Consolidation is the practice, in business, of legally combining two or more organizations into a single new one.It was possibly in fact the first recorded major industry consolidation In business, consolidation or amalgamation is the merger and acquisition of many smaller companies into a few much larger ones.In the context of financial accounting, consolidation refers to the aggregation of financial statements of a group company as consolidated financial statements.Regular dividends are recorded as dividend income whenever they are declared.Impairment loss : An impairment loss occurs when there is a decline in the value of the investment other than temporary.Consolidated financial statements show the parent and the subsidiary as one single entity.During the year, the parent company can use the equity or the cost method to account for its investment in the subsidiary. However, at the end of the year, a consolidation working paper is prepared to combine the separate balances and to eliminate the intercompany transactions, the subsidiary’s stockholder equity and the parent’s investment account.
Control in this context is defined as ability to direct policies and management.The purchasing company uses the cost method to account for this type of investment.Under the cost method, the investment is recorded at cost at the time of purchase.The taxation term of consolidation refers to the treatment of a group of companies and other entities as one entity for tax purposes.
Under the Halsbury's Laws of England, 'amalgamation' is defined as "a blending together of two or more undertakings into one undertaking, the shareholders of each blending company, becoming, substantially, the shareholders of the blended undertakings.
When the amount of stock purchased is between 20% and 50% of the common stock outstanding, the purchasing company’s influence over the acquired company is often significant.