Methods of consolidating subsidiaries

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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.

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Each party in a joint venture has a certain amount of control and responsibility for the costs associated with the venture, as well as sharing profits or losses.

Joint ventures are commonly used to invest in foreign and emerging market economies.

The equity method of accounting is used to determine the net income generated from the joint venture partnership in proportion to the size of a company's respective investment in the venture.

Income earned on the investment must be recorded on the company's income statement.

Let’s be more practical today and learn some advanced accounting techniques.

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".

The equity method and the proportional consolidation method are accounting treatments used when two companies are part of a joint venture.

A joint venture is a type of business agreement involving two or more parties that group their available resources in a common undertaking.

IFRS 10 was issued in May 2011 and applies to annual periods beginning on or after 1 January 2013.

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