When are consolidated financial statements prepared?
A)At the option of an investee company
B)At the option of an investor company
C)If one company owns more than 50% of another company
D)Only if one company owns 100% of another company

Question

Quizplus · Accepted Answer

Consolidated financial statements are prepared when one company (the parent) owns more than 50% of another company (the subsidiary). This is because when a parent company has a controlling interest in a subsidiary, it has the ability to control the financial and operating policies of the subsidiary. Therefore, to provide a true and fair view of the financial position and performance of the group as a whole, consolidated financial statements are necessary. Options A, B, and D are incorrect because the preparation of consolidated financial statements is not optional, but rather a requirement when a parent company has a controlling interest in a subsidiary.

When Are Consolidated Financial Statements Prepared