Consolidated financial statements are appropriate even without a majority ownership if which of the following exists:
A)the subsidiary has the right to appoint members of the parent company's board of directors.
B)the parent company has the right to appoint a majority of the members of the subsidiary's board of directors because other ownership interests are widely dispersed.
C)the subsidiary owns a large minority voting interest in the parent company.
D)the parent company has an ability to assume the role of general partner in a limited partnership with the approval of the subsidiary's board of directors.

Question

Consolidated financial statements are appropriate even without a majority ownership if which of the following exists:
A)​the subsidiary has the right to appoint members of the parent company's board of directors.
B)​the parent company has the right to appoint a majority of the members of the subsidiary's board of directors because other ownership interests are widely dispersed.
C)​the subsidiary owns a large minority voting interest in the parent company.
D)​the parent company has an ability to assume the role of general partner in a limited partnership with the approval of the subsidiary's board of directors.

Quizplus · Accepted Answer

If the parent company has the right to appoint a majority of the members of the subsidiary's board of directors, it has the ability to exercise control over the subsidiary's operations and financial policies. This control could warrant the preparation of consolidated financial statements, even without a majority ownership interest. The other options do not provide sufficient evidence of control over the subsidiary's operations and financial policies.

Consolidated Financial Statements Are Appropriate Even Without a Majority Ownership