If a subsidiary's goodwill is reasonably measurable on the date of acquisition,which consolidation theory should the parent company apply after January 1,2009?
A)Proprietary Theory.
B)Parent Company Theory.
C)Parent Company Extension.
D)Entity Theory.

Question

Quizplus · Accepted Answer

If the subsidiary's goodwill is reasonably measurable on the date of acquisition, the parent company should apply the Entity Theory, which states that the subsidiary is a separate legal entity from the parent and should be consolidated accordingly. In this case, the subsidiary's goodwill would be recognized on the parent company's consolidated financial statements. The other theories are not applicable because they either only apply to specific types of subsidiaries or do not recognize the subsidiary as a separate entity.

If a Subsidiary's Goodwill Is Reasonably Measurable on the Date