994:
the separate balances and to eliminate the intercompany transactions, the subsidiary's stockholder equity and the parent's investment account. The result is one set of financial statements that reflect the financial results of the consolidated entity. There are three forms of combination: (1) horizontal integration: the combination of firms in the same business lines and markets; (2) vertical integration: the combination of firms with operations in different but successive stages of production or distribution or both; (3) conglomeration: the combination of firms with unrelated and diverse products or services functions, or both.
58:
993:
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. Each company keeps separate books. However, at the end of the year, a consolidation working paper is prepared to combine
982:
When the amount of stock purchased is more than 50% of the outstanding common stock, the purchasing company has control over the acquired company. Control in this context is defined as ability to direct policies and management. In this type of relationship the controlling company is the parent and
836:
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). If the acquired company is liquidated then the company
686:
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 the
941:
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. The deciding factor, however, is significant influence. If other factors exist that reduce the influence or if significant
918:
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 company does not need any entries to adjust this account balance unless the investment is considered impaired or there are
809:
A parent company can acquire another company by purchasing its net assets or by purchasing a majority share of its common stock. Regardless of the method of acquisition, the costs (including direct costs, costs of issuing securities and indirect costs) are treated as follows:
829:
When purchasing the net assets the acquiring company records in its books the receipt of the net assets and the disbursement of cash, the creation of a liability or the issuance of stock as a form of payment for the transfer.
927:: Liquidating dividends occur when there is an excess of dividends declared over earnings of the acquired company since the date of acquisition. Regular dividends are recorded as dividend income whenever they are declared.
942:
influence is gained at an ownership of less than 20%, the equity method may be appropriate (FASB interpretation 35 (FIN 35) underlines the circumstances where the investor is unable to exercise significant influence).
973:
Purchase differentials need to be amortized over their useful life; however, new accounting guidance states that goodwill is not amortized or reduced until it is permanently impaired, or the underlying asset is sold.
848:
When the purchasing company acquires the subsidiary through the purchase of its common stock, it records in its books the investment in the acquired company and the disbursement of the payment for the stock acquired.
695:
Consolidation is the practice, in business, of legally combining two or more organizations into a single new one. Upon consolidation, the original organizations cease to exist and are supplanted by a new entity.
949:. Under the equity method, the purchaser records its investment at original cost. This balance increases with income and decreases for dividends from the subsidiary that accrue to the purchaser.
915:, the purchasing company's influence over the acquired company is not significant. (APB 18 specifies conditions where ownership is less than 20% but there is significant influence.)
874:
The cost of the acquired entity and if it applies the number of shares of equity interest issued, the value assigned to those interests and the basis for determining that value.
1116:
802:
956:: At the time of purchase, purchase differentials arise from the difference between the cost of the investment and the book value of the underlying assets.
765:
Parent-subsidiary relationship: the result of a stock acquisition where the parent is the acquiring company and the subsidiary is the acquired company.
740:
Statutory Merger: a business combination that results in the liquidation of the acquired company's assets and the survival of the purchasing company.
322:
307:
1141:
17:
1120:
861:
FASB 141 requires disclosures in the notes of the financial statements when business combinations occur. Such disclosures are:
312:
814:
Direct costs, indirect and general costs: the acquiring company expenses all acquisition related costs as they are incurred.
987:. The parent company needs to issue consolidated financial statements at the end of the year to reflect this relationship.
871:
The period for which results of operations of acquired entity are included in the income statement of the combining entity.
855:
The acquired company records in its books the receipt of the payment from the acquiring company and the issuance of stock.
743:
Statutory
Consolidation: a business combination that creates a new company in which none of the previous companies survive.
621:
472:
176:
73:
327:
317:
83:
1093:
746:
Stock
Acquisition: a business combination in which the purchasing company acquires the majority, more than 50%, of the
379:
1181:
507:
384:
1019:
990:
667:
332:
275:
416:
1004:
369:
31:
1176:
679:
868:
The primary reasons for acquisition and descriptions of factors that contributed to recognition of goodwill.
865:
The name and description of the acquired entity and the percentage of the voting equity interest acquired.
933:: An impairment loss occurs when there is a decline in the value of the investment other than temporary.
969:: the difference between the cost of the investment and the fair market value of the underlying assets.
897:
If NCI based on fair value of purchase price: impairment taken against subsidiary's income & R/E
894:(NCI) based on fair value of identifiable assets: impairment taken against parent's income & R/E
1039:
891:
753:
614:
421:
57:
778:
255:
131:
784:
In an amalgamation, the companies which merge into a new or existing company are referred to as
1044:
720:
Bigger companies tend to have superior bargaining power over their suppliers and clients (e.g.
647:
547:
482:
206:
1083:
1049:
1029:
966:
532:
270:
136:
78:
963:
The difference between the fair market value of the underlying assets and their book value.
923:
717:
Seeking for hidden or nonperforming assets belonging to a target company (e.g. real estate)
663:
655:
582:
121:
8:
607:
572:
567:
542:
537:
477:
406:
364:
346:
299:
280:
211:
116:
41:
1014:
411:
246:
201:
1089:
1059:
1054:
1034:
1009:
772:
592:
587:
166:
141:
1024:
374:
260:
837:
needs an additional entry to distribute the remaining assets to its shareholders.
768:
Controlling
Interest: When the parent company owns a majority of the common stock.
675:
462:
426:
216:
196:
181:
126:
111:
68:
901:
1085:
Business Law: Text and Cases: Legal, Ethical, Global, and
Corporate Environment
817:
Costs of issuing securities: these costs reduce the issuing price of the stock.
467:
435:
146:
1170:
946:
577:
440:
359:
354:
191:
912:
747:
512:
251:
781:: when the parent owns all the outstanding common stock of the subsidiary.
398:
945:
To account for this type of investment, the purchasing company uses the
984:
502:
186:
49:
27:
Merger and acquisition of many smaller companies into much larger ones
651:
919:
liquidating dividends, both of which reduce the investment account.
671:
635:
721:
285:
265:
171:
775:: the rest of the common stock that the other shareholders own.
431:
106:
1082:
Clarkson, Kenneth; Miller, Roger; Cross, Frank (2010-11-29).
902:
Reporting intercorporate interestâinvestments in common stock
880:
The purchase and development assets acquired and written off.
678:
and other entities as one entity for tax purposes. Under the
454:
236:
101:
687:
transfer of one or more companies to an existing company".
241:
1158:
911:
When a company purchases less than 20% of the outstanding
936:
792:
companies. The resultant company is referred to as the
977:
1081:
906:
800:
750:
of the acquired company and both companies survive.
674:term of consolidation refers to the treatment of a
731:
1168:
1117:"Consolidated Statements (Interco eliminations)"
877:Any contingent payments, options or commitments.
736:There are three forms of business combinations:
654:into a few much larger ones. In the context of
615:
959:Purchase differentials have two components:
840:
323:International Financial Reporting Standards
1109:
622:
608:
821:
14:
1169:
937:20% to 50% ownershipâassociate company
714:Cheaper financing for a bigger company
699:
705:Access to new technologies/techniques
313:Generally-accepted auditing standards
846:Treatment to the purchasing company:
1119:. FindMyBestCPA.com. Archived from
827:Treatment to the acquiring company:
328:International Standards on Auditing
24:
978:More than 50% ownershipâsubsidiary
885:Treatment of goodwill impairments:
853:Treatment to the acquired company:
834:Treatment to the acquired company:
25:
1193:
991:Consolidated financial statements
859:FASB 141 disclosure requirements:
668:consolidated financial statements
385:Notes to the financial statements
1020:Consolidated financial statement
907:20% ownership or lessâinvestment
333:Management Accounting Principles
56:
732:Types of business amalgamations
1152:
1134:
1075:
1005:Arrangements between railroads
983:the controlled company is the
759:
32:Consolidation (disambiguation)
13:
1:
1068:
662:refers to the aggregation of
308:Generally-accepted principles
771:Non-Controlling Interest or
7:
997:
690:
10:
1198:
680:Halsbury's Laws of England
29:
711:Access to new geographies
177:Constant purchasing power
74:Constant purchasing power
1182:Mergers and acquisitions
1146:highered.mcgraw-hill.com
1040:Mergers and acquisitions
892:Non-Controlling Interest
841:Purchase of common stock
754:Variable interest entity
508:Accounting organizations
496:People and organizations
779:Wholly owned subsidiary
256:Amortization (business)
18:Amalgamation (business)
954:Purchase Differentials
822:Purchase of net assets
801:Accounting treatment (
666:of a group company as
648:merger and acquisition
1050:Conglomerate discount
1030:Goodwill (accounting)
924:Liquidating dividends
708:Access to new clients
380:Management discussion
1177:Financial accounting
1142:"Chapter Highlights"
1088:. Cengage Learning.
664:financial statements
656:financial accounting
347:Financial statements
300:Accounting standards
30:For other uses, see
700:Economic motivation
573:Earnings management
543:Positive accounting
417:Double-entry system
407:Bank reconciliation
212:Revenue recognition
1015:Business valuation
676:group of companies
548:SarbanesâOxley Act
483:SarbanesâOxley Act
412:Debits and credits
247:Cost of goods sold
202:Matching principle
1060:Tax consolidation
1055:Successor company
1035:Minority interest
1010:Associate company
773:minority interest
632:
631:
593:Two sets of books
588:Off-balance-sheet
230:Selected accounts
167:Accounting period
16:(Redirected from
1189:
1161:
1156:
1150:
1149:
1138:
1132:
1131:
1129:
1128:
1113:
1107:
1106:
1104:
1102:
1079:
1025:Enterprise value
650:of many smaller
624:
617:
610:
60:
37:
36:
21:
1197:
1196:
1192:
1191:
1190:
1188:
1187:
1186:
1167:
1166:
1165:
1164:
1157:
1153:
1140:
1139:
1135:
1126:
1124:
1115:
1114:
1110:
1100:
1098:
1096:
1080:
1076:
1071:
1066:
1000:
980:
939:
931:Impairment loss
909:
904:
843:
824:
807:
762:
734:
702:
693:
628:
599:
598:
597:
562:
554:
553:
552:
527:
519:
518:
517:
497:
489:
488:
487:
457:
447:
446:
445:
401:
391:
390:
389:
349:
339:
338:
337:
302:
292:
291:
290:
231:
223:
222:
221:
217:Unit of account
197:Historical cost
182:Economic entity
161:
153:
152:
151:
96:
88:
69:Historical cost
35:
28:
23:
22:
15:
12:
11:
5:
1195:
1185:
1184:
1179:
1163:
1162:
1151:
1133:
1108:
1095:978-0538470827
1094:
1073:
1072:
1070:
1067:
1065:
1064:
1062:
1057:
1052:
1047:
1042:
1037:
1032:
1027:
1022:
1017:
1012:
1007:
1001:
999:
996:
979:
976:
971:
970:
964:
938:
935:
908:
905:
903:
900:
899:
898:
895:
882:
881:
878:
875:
872:
869:
866:
842:
839:
823:
820:
819:
818:
815:
806:
799:
798:
797:
782:
776:
769:
766:
761:
758:
757:
756:
751:
744:
741:
733:
730:
729:
728:
725:
718:
715:
712:
709:
706:
701:
698:
692:
689:
630:
629:
627:
626:
619:
612:
604:
601:
600:
596:
595:
590:
585:
580:
575:
570:
564:
563:
560:
559:
556:
555:
551:
550:
545:
540:
535:
529:
528:
525:
524:
521:
520:
516:
515:
510:
505:
499:
498:
495:
494:
491:
490:
486:
485:
480:
475:
470:
465:
459:
458:
453:
452:
449:
448:
444:
443:
438:
436:General ledger
429:
424:
419:
414:
409:
403:
402:
397:
396:
393:
392:
388:
387:
382:
377:
372:
367:
362:
357:
351:
350:
345:
344:
341:
340:
336:
335:
330:
325:
320:
315:
310:
304:
303:
298:
297:
294:
293:
289:
288:
283:
278:
273:
268:
263:
258:
249:
244:
239:
233:
232:
229:
228:
225:
224:
220:
219:
214:
209:
204:
199:
194:
189:
184:
179:
174:
169:
163:
162:
159:
158:
155:
154:
150:
149:
144:
139:
134:
129:
124:
119:
114:
109:
104:
98:
97:
94:
93:
90:
89:
87:
86:
81:
76:
71:
65:
62:
61:
53:
52:
46:
45:
26:
9:
6:
4:
3:
2:
1194:
1183:
1180:
1178:
1175:
1174:
1172:
1160:
1159:××××× ××××××ת
1155:
1147:
1143:
1137:
1123:on 2011-03-08
1122:
1118:
1112:
1097:
1091:
1087:
1086:
1078:
1074:
1063:
1061:
1058:
1056:
1053:
1051:
1048:
1046:
1043:
1041:
1038:
1036:
1033:
1031:
1028:
1026:
1023:
1021:
1018:
1016:
1013:
1011:
1008:
1006:
1003:
1002:
995:
992:
988:
986:
975:
968:
965:
962:
961:
960:
957:
955:
952:Treatment of
950:
948:
947:equity method
943:
934:
932:
928:
926:
925:
920:
916:
914:
896:
893:
889:
888:
887:
886:
879:
876:
873:
870:
867:
864:
863:
862:
860:
856:
854:
850:
847:
838:
835:
831:
828:
816:
813:
812:
811:
804:
795:
791:
788:companies or
787:
783:
780:
777:
774:
770:
767:
764:
763:
755:
752:
749:
745:
742:
739:
738:
737:
726:
723:
719:
716:
713:
710:
707:
704:
703:
697:
688:
685:
681:
677:
673:
669:
665:
661:
660:consolidation
657:
653:
649:
645:
641:
640:consolidation
637:
625:
620:
618:
613:
611:
606:
605:
603:
602:
594:
591:
589:
586:
584:
581:
579:
578:Error account
576:
574:
571:
569:
566:
565:
558:
557:
549:
546:
544:
541:
539:
536:
534:
531:
530:
523:
522:
514:
511:
509:
506:
504:
501:
500:
493:
492:
484:
481:
479:
476:
474:
471:
469:
466:
464:
461:
460:
456:
451:
450:
442:
441:Trial balance
439:
437:
433:
430:
428:
425:
423:
422:FIFO and LIFO
420:
418:
415:
413:
410:
408:
405:
404:
400:
395:
394:
386:
383:
381:
378:
376:
373:
371:
368:
366:
363:
361:
360:Balance sheet
358:
356:
355:Annual report
353:
352:
348:
343:
342:
334:
331:
329:
326:
324:
321:
319:
316:
314:
311:
309:
306:
305:
301:
296:
295:
287:
284:
282:
279:
277:
274:
272:
269:
267:
264:
262:
259:
257:
253:
250:
248:
245:
243:
240:
238:
235:
234:
227:
226:
218:
215:
213:
210:
208:
205:
203:
200:
198:
195:
193:
192:Going concern
190:
188:
185:
183:
180:
178:
175:
173:
170:
168:
165:
164:
157:
156:
148:
145:
143:
140:
138:
135:
133:
130:
128:
125:
123:
120:
118:
115:
113:
110:
108:
105:
103:
100:
99:
92:
91:
85:
82:
80:
77:
75:
72:
70:
67:
66:
64:
63:
59:
55:
54:
51:
48:
47:
43:
39:
38:
33:
19:
1154:
1145:
1136:
1125:. Retrieved
1121:the original
1111:
1099:. Retrieved
1084:
1077:
1045:Conglomerate
989:
981:
972:
958:
953:
951:
944:
940:
930:
929:
922:
921:
917:
913:common stock
910:
884:
883:
858:
857:
852:
851:
845:
844:
833:
832:
826:
825:
808:
793:
790:amalgamating
789:
785:
748:Common stock
735:
694:
684:amalgamation
683:
659:
644:amalgamation
643:
639:
633:
513:Luca Pacioli
434: /
254: /
252:Depreciation
160:Key concepts
132:Governmental
760:Terminology
526:Development
503:Accountants
399:Bookkeeping
318:Convergence
276:Liabilities
207:Materiality
95:Major types
1171:Categories
1127:2011-04-15
1069:References
985:subsidiary
794:transferee
786:transferor
561:Misconduct
187:Fair value
137:Management
79:Management
50:Accounting
803:U.S. GAAP
727:Synergies
652:companies
583:Hollywood
463:Financial
365:Cash-flow
122:Financial
998:See also
967:Goodwill
796:company.
691:Overview
672:taxation
636:business
568:Creative
538:Research
468:Internal
455:Auditing
271:Goodwill
266:Expenses
117:Forensic
42:a series
40:Part of
1101:Aug 13,
722:Walmart
646:is the
533:History
427:Journal
286:Revenue
172:Accrual
1092:
670:. The
478:Report
432:Ledger
375:Income
370:Equity
281:Profit
261:Equity
237:Assets
142:Social
107:Budget
473:Firms
102:Audit
1103:2014
1090:ISBN
242:Cash
127:Fund
112:Cost
890:If
642:or
634:In
147:Tax
84:Tax
1173::
1144:.
682:,
658:,
638:,
44:on
1148:.
1130:.
1105:.
805:)
724:)
623:e
616:t
609:v
34:.
20:)
Text is available under the Creative Commons Attribution-ShareAlike License. Additional terms may apply.