Which of the following statements about consolidation is not true?
A)Consolidation is not required when control is temporary.
B)Consolidation may be appropriate in some circumstances when an investor owns less than 51% of the voting common stock.
C)Consolidation is not required when a subsidiary's operations are not homogeneous with those of its parent.
D)Unprofitable subsidiaries may not be obvious when combined with other entities in consolidation.

Question

Which of the following statements about consolidation is not true?
A)​Consolidation is not required when control is temporary.
B)​Consolidation may be appropriate in some circumstances when an investor owns less than 51% of the voting common stock.
C)​Consolidation is not required when a subsidiary's operations are not homogeneous with those of its parent.
D)​Unprofitable subsidiaries may not be obvious when combined with other entities in consolidation.

Quizplus · Accepted Answer

Consolidation is required when control is achieved, which is usually when an investor owns more than 50% of the voting common stock. However, in some circumstances, control may be achieved with less than 50% ownership if the investor has significant influence over the investee. Consolidation is required when the investor has control, regardless of whether the subsidiary's operations are homogeneous or profitable. Option C is not true, as consolidation is always required when control is achieved.

Which of the Following Statements About Consolidation Is Not True