CONSOLIDATED FINANCIAL STATEMENTS

Question 1

Prepared when a parent -subsidiary relationship has been formed

Answer 1

Consolidated financial statement

Question 2

An investor is considered to have parent status when

Answer 2

control over an investee is established or more than 50% of the voting stock of the investee has been acquired

Question 3

All majority-owned subsidiaries(domestic and foreign) must be consolidated under

Answer 3

GAAP

Question 4

Under GAAP , majority owned subsidiaries are NOT CONSOLIDATED when significant doubt exists regarding the parent’s ability to control the subsidiary such as

Answer 4

1. Subsidiary is in legal reorganization

2. Bankruptcy and/or the subsidiary operates under severe foreign restriction

Question 5

Acquisition method is required to be used to record the acquistion of a subsidiary under

Answer 5

GAAP and IFRS

Question 6

The main principles for applying the acquisition method are:

Answer 6

1. Recognition Principle

2. Measurement Principle

Question 7

The acquirer recognizes all of the subsidiary’s assets and liabilities, including identifiable intangible assets

Answer 7

Recognition Principle

Question 8

The acquirer measures each recognized asset and liability and any non-controlling interest at its acquisition date fair value

Answer 8

Measurement Principle

Question 9

Under IFRS, a parent company must consolidate its investments in subsidiaries unless all of the following conditions are met

Answer 9

1. Parent company is a wholly owned subsidiary or

is a partially owned subsidiary of another entity and no objection by owners to the pare