The treasury stock approach to account for parent stock held by subsidiary accounts for the stock as treasury stock for the consolidated entity.

Question

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The treasury stock approach is used to account for parent stock held by subsidiary as if it is treasury stock for the consolidated entity. This means that the parent company's shares held by the subsidiary are subtracted from the parent company's outstanding shares when calculating the consolidated earnings per share. This approach is necessary to avoid double counting the parent company's earnings and shares.

The Treasury Stock Approach to Account for Parent Stock Held