Why do you think GAAP requires consolidation when a company acquires 50% or more of the...
Why do you think GAAP requires consolidation when a company acquires 50% or more of the voting stock of another company?
Homework Answers
As per my opinion Consolidation requirement by GAAP in case of a company acquires 50% or more of voting stock of another company is for good reason, primarily for the benefit of the shareholders and creditors of the parent company. Following are some of the many benefits of consolidated financial reports:
A) Complete Overview to all Stakeholders:
Consolidated statement provides complete overview of Parent Company as well it also indicates overall health of the business and how subsidiary impact parent company to all Stakeholders like Owners, Investors, Interested Parties.
B) Simplifications:
Consolidation process cuts out all transactions that occur between subsidiaries and the parent company since, in the grand scheme of the business, these things cancel each other out. Eliminating these transactions gives a simplified view of business performance.
C) Useful in Strategic Decisions:
Financial consolidation gives leadership the top-level insight they need in order to budget, forecast and plan more effectively.
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Why do you think GAAP requires consolidation when a company
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