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:

Marginal Cost

The cost added by producing one extra unit of a product or service.

Output Effect

The change in total revenue resulting from selling more units at a lower price, in the context of price elasticity of demand.

Socially Efficient

An allocation of resources is considered socially efficient if it cannot be reallocated in a way that improves the wellbeing of one individual without worsening the situation of another.

Collude

To collaborate secretly and illegally with others with the aim of deceiving or obtaining an unfair benefit.