When a Parent Uses the Acquisition Method for Business Combinations

question 67

Multiple Choice

When a parent uses the acquisition method for business combinations and sells shares of its subsidiary, which of the following statements is false?

• A) If majority control is still maintained, consolidated financial statements are still required.
• B) If majority control is not maintained but significant influence exists, the equity method to account for the investment is still used but consolidated financial statements are not required.
• C) If majority control is not maintained but significant influence exists, the equity method is still used to account for the investment and consolidated financial statements are still required.
• D) If majority control is not maintained and significant influence no longer exists, a prospective change in accounting principle to the fair value method is required.
• E) A gain or loss calculation must be prepared if control is lost.

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Definitions:

Neonates

Newborn babies, especially within the first month after birth.

Zygotes

The initial cell formed when a sperm cell fertilizes an egg cell, marking the beginning of human development.

Fetuses

The term used to describe a developing human from roughly eight weeks after conception until birth.

Embryos

An embryo refers to the early stages of development in many organisms, following fertilization and during which vital organs and structures begin to form.