Consolidated financial statements:
A)are prepared if the parent owns more than 20% of the investee's voting stock.
B)do not include a consolidated statement of cash flows because investors need to understand the separate cash flows of the parent and each individual subsidiary.
C)allow investors to gain a better perspective on total operations than they could by examining the reports of the parent and each individual subsidiary.
D)do not identify the amount of noncontrolling interest in subsidiaries' stock because investors do not focus on that information.

Question

Quizplus · Accepted Answer

Consolidated financial statements allow investors to gain a better perspective on total operations by combining the financial information of the parent company and all its subsidiaries into one comprehensive report. This helps investors understand the financial health and performance of the entire consolidated entity, rather than just the parent company or individual subsidiaries. Choice A is incorrect because the threshold for consolidation varies between countries and is generally based on control rather than a fixed percentage of ownership. Choice B is incorrect because consolidated financial statements typically include a consolidated statement of cash flows to show the aggregate cash flows of the consolidated entity. Choice D is incorrect because noncontrolling interest in subsidiaries' stock is an important aspect of consolidated financial statements as it represents the portion of the subsidiary's equity that is not owned by the parent company.

Consolidated Financial Statements