Consolidated financial statements are prepared when one company has:
A) Accounted for the investment using the equity method.
B) Accounted for the investment as securities available for sale.
C) Control over another company.
D) None of these answer choices are correct.

Question

Quizplus · Accepted Answer

Consolidated financial statements are prepared when one company has control over another company. This means that the controlling company has the power to govern the financial and operating policies of the other company, which is known as the subsidiary. The purpose of preparing consolidated financial statements is to show the financial results and position of the controlling company and its subsidiaries as if they were a single economic entity. The other choices, accounting for the investment using the equity method and as securities available for sale, do not necessarily require the preparation of consolidated financial statements.

Consolidated Financial Statements Are Prepared When One Company Has