There Are Three Main Concepts of Consolidation - Proprietary, Entity

question 56

Multiple Choice

There are three main concepts of consolidation - proprietary, entity and parent entity. The choice of concept affects how consolidated financial statements are prepared:

• A)Only where the subsidiary is less than wholly owned by the parent.
• B)Only where the subsidiary is wholly owned by the parent.
• C)Always.
• D)Only where the subsidiary is profitable.

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Definitions:

Equity Method

An accounting technique used to record investments in associate companies, reflecting the investor's proportional share of the investee's net income or loss.

Carrying Amount

The value at which an asset or liability is recognized on the balance sheet, calculated as historical cost minus accumulated depreciation or amortization and impairment losses.

Legal Obligations

Commitments or duties bound by law that require an individual or company to act or refrain from acting in a certain manner.

Other Comprehensive Income

Earnings derived from non-operational activities that are not included in net income, recorded in equity.