The view that only the parent company's share of the unrealized intercompany profit recognized by the selling affiliate that remains in assets should be eliminated in the preparation of consolidated financial statements is consistent with the:
A) economic unit concept.
B) current practice concept.
C) parent company concept.
D) historical cost company concept.

Question

Quizplus · Accepted Answer

The parent company concept focuses on the interests of the parent company's shareholders. According to this concept, in consolidated financial statements, only the parent company's share of unrealized intercompany profits (those profits that result from transactions within the group but have not yet been realized outside the group) that remain in assets should be eliminated. This is because the concept emphasizes the financial results and position from the perspective of the parent company's shareholders, rather than presenting a view of the group as a single economic entity.

The View That Only the Parent Company's Share of the Unrealized