Asked by Tasia Williams on May 04, 2024
Verified
When an investor owns more than 50% of the common shares of another company,
A) consolidated financial statements are usually prepared.
B) the fair value through profit or loss model is used.
C) the investor is called a subsidiary.
D) the investor recognizes income only when dividends are received.
Consolidated Financial Statements
Financial statements that show the aggregated financial position and results of operations for a parent company and its subsidiaries.
Subsidiary
A company that is controlled by another company, commonly known as the parent company, through ownership of more than half of its voting stock.
- Understand the consequences of possessing a majority stake in another organization and the obligation to prepare consolidated financial reports.
Verified Answer
CW
Connie WrightMay 06, 2024
Final Answer :
A
Explanation :
When an investor owns more than 50% of the common shares of another company, it typically results in the investor having control over that company. This control necessitates the preparation of consolidated financial statements to reflect the financial position and operations of both the investor and the investee as a single economic entity.
Learning Objectives
- Understand the consequences of possessing a majority stake in another organization and the obligation to prepare consolidated financial reports.
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