Questions to think about while reading this chapter:

• Total ownership is not an absolute requirement for consolidation; a parent need only gain control of another company to create a business combination. If a parent obtains less than 100 percent of a subsidiary’s voting stock, how do the consolidated financial statements reflect the presence of the other owners? What accounting and reporting are appropriate for a noncontrolling interest?



• If a parent holds less than complete ownership, are the subsidiary’s assets and liabilities consolidated at 100 percent of their fair values or should the reported figures be affected by the degree of the parent’s ownership?



• If a parent acquires several blocks of a subsidiary’s stock over a period of time prior to gaining control, how are the various purchases consolidated?



• How are a subsidiary’s revenues and expenses reported on a consolidated income statement when the parent gains control within the current year?



• When a parent buys or sells shares in its own subsidiary, how should the parent report the effects of such transactions in its consolidated financial statements?