Assume that ABCO is a U.S. multinational corporation. Its foreign subsidiaries must report income in their respective countries according to GAAP in those countries. How must ABCO report its consolidated financial statements?
A) ABCO must choose any one country's accounting standards and combine the subsidiary reports into the parent company's statements using that one country's GAAP.
B) Since the company is operating in several different countries, the International Accounting Standards must be used for the consolidated financial statements.
C) Since ABCO is a U.S. corporation, U.S. generally accepted accounting principles, or GAAP, must be used for the consolidated financial statements.
D) On the consolidated financial statements, each subsidiary's financial results must be shown in the currency of the country where the subsidiary is located.

Question

Quizplus · Accepted Answer

Since ABCO is a U.S. corporation, it must report its consolidated financial statements in accordance with U.S. GAAP. The foreign subsidiaries' financial statements will need to be converted to U.S. GAAP to be included in the consolidated financial statements. The fact that the foreign subsidiaries' reports are prepared using different GAAP does not affect ABCO's obligations to report in accordance with U.S. GAAP.

Assume That ABCO Is a U