Preparation of consolidated financial statements when a parent-subsidiary relationship exists is an example of the
A) economic entity assumption.
B) relevance characteristic.
C) comparability characteristic.
D) neutrality characteristic.

Question

Quizplus · Accepted Answer

The preparation of consolidated financial statements when a parent-subsidiary relationship exists is based on the economic entity assumption, which assumes that the parent and its subsidiaries are a single economic entity. This assumption allows for the consolidation of the financial statements of the parent company and its subsidiaries in order to present a complete picture of the overall financial position and performance of the economic entity.

Preparation of Consolidated Financial Statements When a Parent-Subsidiary Relationship Exists