If Pol Corporation owns 25% of the outstanding common stock of Sel Company and 90% of the outstanding common stock of Slu Company, which in turn owns 40% of Sel's outstanding common stock, the financial statements of Slu and Sel must be consolidated before the financial statements of Pol and Slu are consolidated.

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Quizplus · Accepted Answer

Pol Corporation directly owns 25% of Sel and indirectly owns an additional 36% of Sel through its 90% ownership of Slu (which owns 40% of Sel). This does not automatically require consolidation of Slu and Sel before Pol and Slu; consolidation decisions are based on control, and Pol's combined direct and indirect control of Sel might not necessitate Sel's consolidation into Slu before consolidating with Pol.

If Pol Corporation Owns 25% of the Outstanding Common Stock