FAR 3 - Consolidated Financial Statements

Question 1

What is the criteria for consolidation?

Answer 1

50% or more of the voting stock

Question 2

When would you not consolidate under U.S. GAAP?

Answer 2

1) The subsidiary is in legal reorganization

2) Bankruptcy and/or the subsidiary operates under severe foreign restrications

Question 3

When would you not consolidate under IFRS?

Answer 3

All of the following need to be met in order to not consolidate in IFRS:

1) The parent company is itself a wholly owned subsidiary, or is a partially owned subsidiary of another entity and the other owners do not object to the parent not presenting financial statements.

2 The parent company is not publicly traded and is not in the process of issuing securities in a public market

3) The ultimate or any intermediate parent of the parent company produces financial statements in compliance with IFRS.

Question 4

What are the main principles for applying the acquisition method?

Answer 4

1) Recognition principle - the acquirer recognizes all of the subsidiary’s assets and liabilities, including identifiable intangible assets.
2) Measurement Principle - the acquirer measures each recognized asset and liability and any noncontrolling interest at its acquisition date fair value.