Business Combination/Consolidation

Question 1

Consolidated Fin statement:

in case of several entities, for which entity do you prepare consolidated Financial Statement ?

Answer 1

Consolidated fin statements are prepared for the parent company ( company that has Financial controlling interests).
Exception: do not prepare consolidated financials for an entity for which the parent don’t have legal control because of
- sub is in bankruptcy
- sub operates in foreign country with currency or government restrictions
- sub is in legal reorganization

Question 2

Accounting concept behind business consolidation

Answer 2

Economic entity can be identified with a unit of accountability.