One Complication That Arises in Consolidation When the Parent and Subsidiary

question 25

Multiple Choice

One complication that arises in consolidation when the parent and subsidiary have filed separate tax returns is:​

• A)​timing differences are created in consolidation for items such as intercompany profits in inventory.
• B)​the parent and subsidiary may both incur taxes on the same items.
• C)​a special tax reserve must be set up in owners' equity.
• D)​None of the above.

---

Definitions:

Accounting Standards

Rules and guidelines set by authoritative bodies that dictate how financial transactions and statements should be recorded and reported.

External Users

Refers to individuals or entities outside of a company who use its financial information, such as investors, creditors, and regulatory agencies.

Accounting Standards

The rules and guidelines set by regulatory bodies that govern the preparation and presentation of financial statements.

Generally Accepted Accounting Principles

A collection of commonly-followed accounting rules and standards for financial reporting that is adopted by organizations to ensure consistency and transparency in financial statements.