Consolidating 100 owned subsidiary

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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.

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.

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.

Under the equity method, the purchaser records its investment at original cost.

The deciding factor, however, is significant influence.

Upon consolidation, the original organizations cease to exist and are supplanted by a new entity.

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; direct costs, costs of issuing securities and indirect costs are treated as follows: Treatment to the acquiring company: 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.

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).

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