how consolidation works
the term consolidate comes from from the latin consolidatus which means to combine into one body whatever the context to consolidate involves bringing together some larger amount of items into a single smaller number for instance a traveler may consolidate all of their luggage into a single larger bag in finance and accounting consolidation has more specific nuance consolidation involves taking multiple accounts or businesses and combining the information into a single point in financial accounting consolidated financial statements provide a comprehensive view of the financial position of both the parent company and its subsidiaries rather than one company s stand alone position in consolidated accounting the information from a parent company and its subsidiaries is treated as though it comes from a single entity the cumulative assets from the business as well as any revenue or expenses are recorded on the balance sheet of the parent company this information is also reported on the income statement of the parent company consolidated financial statements are used when the parent company holds a majority stake by controlling more than 50 of the subsidiary business parent companies that hold more than 20 qualify to use consolidated accounting if a parent company holds less than a 20 stake it must use equity method accounting in business consolidation occurs when two or more businesses combine to form one new entity with the expectation of increasing market share and profitability and the benefit of combining talent industry expertise or technology also referred to as amalgamation consolidation can result in the creation of an entirely new business entity or a subsidiary of a larger firm this approach may combine competing firms into one cooperative business for example in 2015 target corp moved to sell the pharmacy portion of its business to cvs health a major drugstore chain as part of the agreement cvs health intended to rebrand the pharmacies operating within target stores changing the name to minuteclinic the consolidation was friendly in nature and lessened overall competition in the pharmacy marketplace a consolidation differs in practical terms from a merger in that the consolidated companies may also result in a new entity whereas in a merger one company absorbs the other and remains in existence while the other is dissolved within the consumer market consolidation includes using a single loan to pay off all of the debts that are part of the consolidation this transfers the debt owed from multiple creditors allowing the consumer to have a single point of payment to pay down the total often debt consolidation achieves more manageable monthly payments and may result in a lower overall interest rate for instance it may wrap a high interest credit card payment into a more reasonable home equity line of credit heloc consolidation is also a technical analysis term referring to security prices oscillating within a corridor and is generally interpreted as market indecisiveness put another way consolidation is used in technical analysis to describe the movement of a stock s price within a well defined pattern of trading levels consolidation is generally regarded as a period of indecision which ends when the price of the asset moves above or below the prices in the trading pattern the consolidation pattern in price movements is broken upon a major news release that materially affects a security s performance or the triggering of a succession of limit orders consolidation is also defined as a set of financial statements that presents a parent and a subsidiary company as one company 