Which of the following regarding the preparation of Consolidated Financial Statement is correct? A. Once the parent company prepares Consolidated Financial Statements, it no longer needs to prepare financial statements for its own activities. B. Only the subsidiaries

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter6: Audit Evidence

Section: Chapter Questions

Problem 15CYBK

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Concept explainers

Consolidation

Consolidation in general examination implies an asset oscillating between well-defined methods of trading status. Consolidation is commonly known as market indecisiveness, which completes when the asset's values move forward or backward the trading structure.

Question

Which of the following regarding the preparation of Consolidated Financial Statement is
correct?
A. Once the parent company prepares Consolidated Financial Statements, it no longer
needs to prepare financial statements for its own activities.
B. Only the subsidiaries are required to prepare Financial Statements.
C. Consolidated Financial Statements are required by the Parent Company for reporting
purposes only; each company must continue to prepare its own Financial
Statements.
D. Consolidated Financial Statements are required only when both companies are
publicly traded.

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Which statement is incorrect concerning the preparation of consolidated financial statements? A. When the reporting dates of the parent and a subsidiary are different, the difference shall be no more than six months. B. The financial statements of the parent and its subsidiaries shall be consolidated on a line by line basis nu adding together like items of assets, liabilities, equity, income and expenses. C. Consolidated financial statements shall be prepared using uniform accounting policies for like transactions and other events in similar circumstances. D. Intragroup dividends shall be eliminated in full.
Choose the correct. Which of the following is the best theoretical justification for consolidated financial statements?a. In form the companies are one entity; in substance they are separate.b. In form the companies are separate; in substance they are one entity.c. In form and substance the companies are one entity.d. In form and substance the companies are separate. (AICPA)
Which of the following statements regarding IFRS consolidated financial statements is/are correct: (i) An entity that has equity investments in one or more other entities is required to present consolidated financial statements (ii) A parent whose debt or equity instruments are not traded in a public market is not required to present consolidated financial statements (iii) Consolidated financial statements present the assets, liabilities, equity, income, expenses and cash flows of the parent and its subsidiaries as those of a single economic entity
Which of the following is the best theoretical justification for consolidated financial statements?a. In form the companies are one entity; in substance they are separate.b. In form the companies are separate; in substance they are one entity.c. In form and substance the companies are one entity.d. In form and substance the companies are separate. (AICPA)
Which of the following are considered separate financial statements? a. Those presented by a parent in addition to the consolidated financial statements, in compliance with a regulatory requirement. b. Those presented by an entity, which does not have a subsidiary or associate and is not a venturer in jointly controlled entity. c. Those presented by an entity which does not have any equity interest in another entity. d. Financial statements of an entity that applies the equity method.
an accounting change may result in financial statements that are actually those of a different reporting entity. Th change should be reported by restating the financial statements of all prior periods presented. Which of the following is not a change in the reporting entity? A. Presenting consolidated statements in place of statements of individual companies or accounting for a business combination using the pooling of interests methodB. Changing specific subsidiaries included in the group of companies for which consolidated financial statements are presented or changing the companees included in combined financial statementsC. The creation, cessation, purchase, or disposition of a subsidiary or other business unitD. A change among the cost, equity, or consolidation methods of accounting for subsidiaries and investments
Which of the following statements is not correct in relation to consolidation accounting key terms? Select one alternative: Consolidated financial statements are financial statements of a group of entities presented as if that group was acting as a single economic entity. A parent is an entity that has more than one subsidiary. A subsidiary is an entity that is controlled by another entity. A group comprises a parent and all of its subsidiaries.
The preparation of consolidated financial statements: Select one alternative: does not obviate the need for separate entities to prepare and release their own separate financial statements and should be done in accordance with IFRS 10 will eliminate the result derived from operations with parties external to the group of entities highlights income derived as a result of transactions within the group obviates the need for separate entities to prepare and release their own separate financial statements
A company acquires a subsidiary and will prepare consolidated financial statements for external reporting purposes. For internal reporting purposes, the company has decided to apply the equity method. Why might the company have made this decision? It is a relatively easy method to apply. Operating results appearing on the parent’s financial records reflect consolidated totals. GAAP now requires the use of this particular method for internal reporting purposes. Consolidation is not required when the parent uses the equity method.
Statement 1: The preparation of consolidated financial statements after acquisition is materially different concept from preparing them in the acquisition date in the sense that reciprocal accounts are eliminated and remaining balances are combined. Statement 2: All revenues and expenses of individual consolidating companies arising from transactions and actions with affiliated companies are included in the consolidated financial statements. a. Only Statement 1 is correct b. Both statements are correct c. Only Statement 2 is correct d. Both statements are incorrect
A company acquires a subsidiary and will prepare consolidated financial statements for external reporting purposes. For internal reporting purposes, the company has decided to apply the initial value method. Why might the company have made this decision? It is a relatively easy method to apply. Operating results appearing on the parent’s financial records reflect consolidated totals. GAAP now requires the use of this particular method for internal reporting purposes. Consolidation is not required when the parent uses the initial value method.
S1: The preparation of consolidated financial statements after acquisition is materially different concept from preparing them in the acquisition date in the sense that reciprocal accounts are eliminated and remaining balances are combined. S2: All revenues and expenses of individual consolidating companies arising from transactions and actions with affiliated companies are included in the consolidated financial statements. A. Only S2 is correct B. Both statements are incorrect C. Only S1 is correct D. Both statements are correct