Key questions to consider when determining the appropriate consolidation adjustment entries include the following except for:
A) What is the tax effect of the adjustments made?
B) What has been recorded by the legal entities?
C) Is this a prior period or a current period transaction?
D) Does the transaction involve the parent entity selling assets to the subsidiary, or the subsidiary selling assets to the parent entity?

Question

Quizplus · Accepted Answer

The other three questions (tax effect, recorded amounts, and timing) are all important considerations when determining consolidation adjustments. However, whether the transaction involves the parent entity selling assets to the subsidiary or the subsidiary selling assets to the parent entity does not necessarily affect the appropriateness of the consolidation adjustment entries. The key is to ensure that the financial statements of the consolidated entity reflect the economic substance of the business transactions between the related parties.

Key Questions to Consider When Determining the Appropriate Consolidation Adjustment