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.

---

Definitions:

Intelligence

The capacity for learning, understanding, and applying knowledge and skills, often seen as the ability to adapt to new situations.

Interdependence

A mutual reliance between two or more groups or things, where each is dependent on the other for success or survival.

Interaction Ties

Refers to the connections and relationships between individuals or groups that facilitate interaction.

Distinct Societies

Separate communities or social groups characterized by unique cultures, traditions, or social structures.