In preparing a consolidated financial report,the parent entity consolidates:
A) the financial statements of all entities over which it has the power to exercise control.
B) the financial statements of only those entities over which it has the power to control and in which it holds more than 50% of the voting shares.
C) the financial statements of only those entities in which it holds more than 50% of the ordinary issued capital; as a result, it necessarily has the power to exercise control.
D) none of the above.

Question

Quizplus · Accepted Answer

The correct answer is A because in preparing a consolidated financial report, the parent entity consolidates the financial statements of all entities over which it has the power to exercise control, regardless of the percentage of ownership. Control can be achieved through various means, not just holding more than 50% of the voting shares.

In Preparing a Consolidated Financial Report,the Parent Entity Consolidates