If an acquisition by a parent of a subsidiary occurs during the accounting period,adjustments must be made for the income earned by a subsidiary prior to the acquisition date.

Question

Quizplus · Accepted Answer

This is true as the income earned by a subsidiary prior to acquisition is known as pre-acquisition income and needs to be separately accounted for in the consolidated financial statements. This adjustment is made through the application of the acquisition method of accounting.

If an Acquisition by a Parent of a Subsidiary Occurs