Which of the following statements is correct?
A) The economic unit concept suggests partial elimination of unrealized intercompany profits.
B) The parent company concept suggests partial elimination of unrealized intercompany profits.
C) The economic unit concept suggests no elimination of unrealized intercompany profits.
D) The parent company concept suggests total elimination of unrealized intercompany profits.

Question

Quizplus · Accepted Answer

The parent company concept suggests partial elimination of unrealized intercompany profits, reflecting the perspective that transactions between the parent and subsidiaries are partially external. This contrasts with the economic unit concept, which views the group as a single entity, leading to total elimination of unrealized profits in consolidation.

Which of the Following Statements Is Correct