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General questions Under GAAP, a parent company should exclude a subsidiary from consolidation if: It measures income from the subsidiary under the equity method The subsidiary is in a regulated industry The subsidiary is a foreign entity whose books are recorded in a foreign currency The parent does not have control of the subsidiary The FASB’s primary motivation for requiring consolidation of all majority-owned subsidiaries was to: Ensure disclosure of all loss contingencies Prevent the use of off–balance sheet financing Improve comparability of the statements of cash flows Establish criteria for exclusion of finance and insurance subsidiaries from consolidation

General questions Under GAAP, a parent company should exclude a subsidiary from consolidation if: It measures income from the subsidiary under the equity method The subsidiary is in a regulated industry The subsidiary is a foreign entity whose books are recorded in a foreign currency The parent does not have control of the subsidiary The FASB’s primary motivation for requiring consolidation of all majority-owned subsidiaries was to: Ensure disclosure of all loss contingencies Prevent the use of off–balance sheet financing Improve comparability of the statements of cash flows Establish criteria for exclusion of finance and insurance subsidiaries from consolidation

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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General questions

  1. Under GAAP, a parent company should exclude a subsidiary from consolidation if:

    1. It measures income from the subsidiary under the equity method

    2. The subsidiary is in a regulated industry

    3. The subsidiary is a foreign entity whose books are recorded in a foreign currency

    4. The parent does not have control of the subsidiary

  2. The FASB’s primary motivation for requiring consolidation of all majority-owned subsidiaries was to:

    1. Ensure disclosure of all loss contingencies

    2. Prevent the use of off–balance sheet financing

    3. Improve comparability of the statements of cash flows

    4. Establish criteria for exclusion of finance and insurance subsidiaries from consolidation

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