Consolidated financial statements are appropriate when an investor controls an investee by ownership of more than 50% of the investee's common stock.

Question

Quizplus · Accepted Answer

This is true according to generally accepted accounting principles (GAAP) and International Financial Reporting Standards (IFRS). When an investor owns more than 50% of the common stock of an investee, they have control over the investee's financial and operating policies, so the consolidated financial statements will reflect the assets, liabilities, revenues, and expenses of both the investor and the investee as if they were a single entity.

Consolidated Financial Statements Are Appropriate When an Investor Controls an Investee