In the context of financial accounting, consolidation refers to the aggregation of financial statements of a group company as consolidated financial statements.The taxation term of consolidation refers to the treatment of a group of companies and other entities as one entity for tax purposes.Treatment to the acquired company: The acquired company records in its books the elimination of its net assets and the receipt of cash, receivables or investment in the acquiring company (if what was received from the transfer included common stock from the purchasing company).
Both corporations remain separate legal entities, regardless of the investment purpose.
In this section, you learn how to account for business combinations.
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.
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".
Companies commonly break out their consolidated statements by division or subsidiary so investors can see the relative performance of each, but in many cases this is not required, especially if the company owns 100% of the division or subsidiary.