When a consolidated income tax return is filed and the subsidiary issues separate financial statements to its lenders, income taxes must be reported in the subsidiary's income statement.

Question

Quizplus · Accepted Answer

When a subsidiary issues separate financial statements to its lenders or for any other purpose, it must report income taxes in its income statement as if it filed its own tax return, even though the actual tax liability is settled through the consolidated tax return filed by the parent company. This approach ensures that the subsidiary's financial statements reflect its standalone financial performance and tax obligations.

When a Consolidated Income Tax Return Is Filed and the Subsidiary