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Beta Corporation owns less than 100% of the voting common stock of Shedds Co. Under what...

Beta Corporation owns less than 100% of the voting common stock of Shedds Co. Under what conditions will Beta be required to prepare consolidated financial statements?

Expand on some of the factors/conditions.

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Answer #1

An entity has to prepare consolidated financial statements when it exercises control over another enterprise. The following conditions if satiesfied by Beta would warrant preparation of consolidated financial statements:

- Ownership of more than 50% of the voting common stock

- Control of the composition of board of directors

If Beta Corporation owns more than 50% of the voting common stock of Shedds Co. or can alter the structure of the board of directors of Shedd Co, it should prepare consolidated financial statements.

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