Financial Statements Represent More Than One Corporation

2324 Words Nov 16th, 2016 10 Pages
When financial statements represent more than one corporation, we refer to them as consolidated financial statements. So, how does consolidated financial statements play a role in corporations? What are the reasons and benefits for the consolidation of financial statements? What are the steps that are necessary to ensure the proper accounting? What are a few excerpts from Accounting Standards Codification? Thus, these are a few of various questions that are asked to further understand Consolidated Financial statements. As of today, several corporations are combined with numerous separate companies and thus consolidated financial statements need to be prepared. The traditional view of control includes both direct and indirect control. When one company owns much of another company’s common stock it is said to have a direct control. An indirect control is when a company’s common stock is owned by one or more other companies that are all under a common control. Although the most common means of acquiring control are through majority ownerships, which means more than 50% of outstanding voting stock(s) are held, a company may still be able to direct the operating and financing policies of another with less than majority ownership. Nonetheless, there are some instances when majority stockholders of a subsidiary may not be able to exercise control even though they hold more than 50% of its outstanding voting stock due to legal reorganizations, bankruptcy’s, lack of controls and…
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