A company acquires a subsidiary and will prepare consolidated financial statements for external…

A company acquires a subsidiary and will prepare consolidated financial statements for external reporting purposes. For internal reporting purposes, the company has decided to apply the equity method. Why might the company have made this decision?

a. It is a relatively easy method to apply.

b. Operating results appearing on the parent’s financial records reflect consolidated totals.

c. GAAP now requires the use of this particular method for internal reporting purposes.

d. Consolidation is not required when the parent uses the equity method

 

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