Question：Which of the following statements relating to parent companies and subsidiaries are correct?
A. A parent company could consolidate a company in which it holds less than 50% of the ordinary share capital in certain circumstances.
B. Goodwill on consolidation will appear as an item in the parent company's individual statement of financial position.
C. Consolidated financial statements ignore the legal form of the relationship between parents and subsidiaries and present the results and position of the group as if it was a single entity.
The correct answers are:
A parent company could consolidate a company in which it holds less than 50% of the ordinary share capital in certain circumstances.
Consolidated financial statements ignore the legal form of the relationship between parents and subsidiaries and present the results and position of the group as if it was a single entity.
A parent may hold less than 50% of the share capital but more than 50% of the voting rights. Goodwill only appears in the consolidated statement of financial position. It is not amortised. Consolidated financial statements present the substance of the relationship between parent and subsidiaries, rather than the legal form.
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