List Three Disadvantages of the Divisional Structure

question 90

Essay

List three disadvantages of the divisional structure.

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Definitions:

Intercompany Profits

Profits derived from transactions between companies within the same group, which may need to be eliminated in consolidated financial statements.

Goodwill

An intangible asset that arises when a business is acquired for more than the fair value of its identifiable net assets; reflects the value of the brand, customer relationships, and reputation.

Parent-Company Extension Method

This method involves the accounting for investments in subsidiaries from the perspective of the parent company, focusing on the extension of the parent company's financial statements to include its interest in subsidiaries.

Entity Method

An approach in accounting that records the investments of a parent company in a subsidiary as distinct separate entities.