Which of the following statements about intercompany transactions in a corporate group is true?

Question

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Intercompany transactions within a corporate group are eliminated during consolidation in order to avoid double counting of revenues, expenses, assets and liabilities. Therefore, these transactions do not appear in the consolidated financial statements. Option A is incorrect, as intercompany transactions are common in parent-subsidiary relationships. Option C is incorrect, as intercompany transactions are not recognized as revenue in the consolidated financial statements. Option D is incorrect, as intercompany transactions are not added to the combined shareholders equity when consolidation occurs.

Which of the Following Statements About Intercompany Transactions in a Corporate