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Consolidation of Accounts

1. The requirement of consolidated financial statements for parent and subsidiary companies has become a controversial issue in the field of international accounting. U.S. GAAP requires parent and subsidiary companies to report their information on a consolidated basis. However, under IAS 27 Consolidated and Separate Financial Statements, the IASB allows for consolidated and separate (non-consolidated) accounting methods. Consider the impact of these accounting methods on financial statements and their users. Think about whether the IASB should require parent and subsidiary companies to report on a consolidated basis.
With these thoughts in mind I will do an assessment of the impact of consolidated and separate accounting methods on financial statements and their users. How do these two methods compare to each other? Provide your opinion on whether the IASB should require parent and subsidiary companies to report on a consolidated basis. (half page)

2. The requirement of consolidated financial statements for parent and subsidiary companies has become a controversial issue in the field of international accounting. U.S. GAAP requires parent and subsidiary companies to report their information on a consolidated basis. However, under IAS 27 Consolidated and Separate Financial Statements, the IASB allows for consolidated and separate (non-consolidated) accounting methods. Consider the impact of these accounting methods on financial statements and their users. Think about whether the IASB should require parent and subsidiary companies to report on a consolidated basis. I will complete an assessment of the impact of consolidated and separate accounting methods on financial statements and their users. How do these two methods compare to each other? Provide your opinion on whether the IASB should require parent and subsidiary companies to report on a consolidated basis. Be sure to support your response with references to this week's Learning Resources. (Half page

Solution Preview

1. IASB allows for consolidated and separate accounting methods. The impact of these methods on financial statements is that if there is consolidation, it is primarily for the benefits of the shareholders, lenders, and employees of the parent company. The financial statements do not show the financial performance of the subsidiaries. The focus on the consolidation is on the total resources of the combined company. It gives a clear picture of the entire company. Currently, IFRS 10 gives a new definition of control which is used to determine which entities are consolidated, IFRS 11 gives joint arrangements which describe the accounting for joint arrangements, and IFRS 12 requires disclosure of interests in other entities. The problem is that under ...

Solution Summary

The answer to this problem explains the need for consolidated financial statements for parent and subsidiary companies . The references related to the answer are also included.

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