Which Statement About the Differences Between Consolidation Methods Permitted Under

question 4

Multiple Choice

Which statement about the differences between consolidation methods permitted under US GAAP and IFRS is true?

• A) IFRS and US GAAP both require the use of the entity theory.
• B) IFRS and US GAAP both require the use of the parent company extension theory.
• C) IFRS permits either the entity theory or the parent company extension theory; US GAAP requires the entity theory.
• D) IFRS permits either the entity theory or the parent company extension theory; US GAAP requires the parent company extension theory.

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Definitions:

Discount Rate

The interest rate used to discount future cash flows of a financial instrument to present value.

Present Obligation

A duty or responsibility that is expected to be settled in the future, recognized as a liability.

Past Event

An event or transaction that has occurred prior to the balance sheet date, impacting the financial position or performance of an entity.