Which of the following investments in securities would require the preparation of consolidated financial statements by the investor corporation?

Question

Quizplus · Accepted Answer

Consolidated financial statements are required when a company has a controlling interest in the investee, meaning it has the power to govern the financial and operating policies of the investee. Investing in securities for the purpose of exerting control over the investee's day-to-day operations would give the investor corporation the ability to make decisions that could significantly impact the investee's financial and operating policies, and therefore would require the preparation of consolidated financial statements. Significant influence over dividend payout policy or licensing of a patent or day-to-day operations would not require the preparation of consolidated financial statements, as they do not give the investor corporation the power to govern the investee's financial and operating policies.

Which of the Following Investments in Securities Would Require the Preparation