An investor prepares a single set of financial statements which encompasses the financial results for both it and its investee because:
A)The investor has a controlling interest in its investee.
B)The investor has a passive interest in its investee.
C)The investor has an influential interest in its investee.
D)The investor has an active interest in its investee.

Question

An investor prepares a single set of financial statements which encompasses the financial results for both it and its investee because:
A)​The investor has a controlling interest in its investee.
B)​The investor has a passive interest in its investee.
C)​The investor has an influential interest in its investee.
D)​The investor has an active interest in its investee.

Quizplus · Accepted Answer

The investor prepares a single set of financial statements that encompasses the financial results for both itself and its investee when it has a controlling interest in its investee. This means that the investor has the power to direct the activities of the investee and obtain benefits from its activities. As a result, the investor consolidates the financial information of its investee with its own financial information to provide a complete picture of its financial position and performance. The other choices (B, C, and D) do not require the investor to prepare a single set of financial statements that encompass the financial results for both itself and its investee.

An Investor Prepares a Single Set of Financial Statements Which