GAAP Rules and Consolidation
Process
C4-1 Need for Consolidation
Process
At a recent staff meeting, the
vice president of marketing appeared confused. The controller had assured him
that the parent company and each of the subsidiary companies had properly
accounted for all transactions during the year. After several other questions,
he finally asked, “If it has been done properly, then why must you spend
so much time and make so many changes to the amounts reported by the individual
companies when you prepare the consolidated financial statements each month?
You should be able just to add the reported balances together.”
Required
Prepare an appropriate response to
help the controller answer the marketing vice president’s question.
Please address the GAAP rules and
the reasons behind them.
