Which of the following statements is not correct?
A) Percentage of control is the term used to reflect the degree of dependency in which a parent company holds its subsidiaries or associates.
B) The percentage of control is used to determine the consolidation method in establishing the consolidated financial statements.
C) The percentage of control held by a parent is always equal to the percentage of interest it holds in a given subsidiary or associate.
D) The percentage of interest is used in the process of consolidation of accounts and calculations to define majority and minority interests.

Question

Quizplus · Accepted Answer

The statement "The percentage of control held by a parent is always equal to the percentage of interest it holds in a given subsidiary or associate" is not correct. Percentage of control takes into account not only the ownership percentage but also the ability of the parent company to direct the financial and operating policies of its subsidiary. Therefore, the percentage of control may be higher or lower than the percentage of interest held by the parent company.

Which of the Following Statements Is Not Correct