Consolidating accounts with different year ends

Treatment to the acquired company: The acquired company records in its books the receipt of the payment from the acquiring company and the issuance of stock.FASB 141 Disclosure Requirements: FASB 141 requires disclosures in the notes of the financial statements when business combinations occur.The company does not need any entries to adjust this account balance unless the investment is considered impaired or there are liquidating dividends, both of which reduce the investment account.

Consolidating accounts with different year ends

If other factors exist that reduce the influence or if significant 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).

To account for this type of investment, the purchasing company uses the equity method.

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.

Treatment of Purchase Differentials: 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.

Purchase differentials have two components: 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.

In business, consolidation or amalgamation is the merger and acquisition of many smaller companies into 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.

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