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ARB
No. 51
Accounting Research Bulletin (ARB) No. 51
a.
Consolidated Financial Statements
b. Issued in August 1959
c.
ARB No. 51: Amended by
SFAS No. 94, October 1987.
Consolidated
statements
Consolidated statements are more meaningful
--> than separate
statements.
Consolidated
statements are necessary
--> when one of the
companies has
a controlling financial interest
in other companies.
General rule of
controlling financial interest
--> Ownership of majority voting interest
--> Ownership of
over 50% of outstanding voting shares
Exceptions to
general rule
a.
Control does not rest with the majority owner
(Significant doubt on the parent's ability to control the subsidiary)
b. Minority interest in the
subsidiary is large.
c. Foreign subsidiaries.
d. Non-homogeneous operations
(Parent company in manufacturing and
a subsidiary in banking or insurance industry)
Exceptions
b, c and d
-->
eliminated by SFAS No. 94.
Difference
in fiscal periods
(between parent and
a subsidiary)
--> not a justification for the exclusion of a subsidiary.
Difference in fiscal
periods is more than 3 months
-->
Subsidiary's statements are prepared for the parent's fiscal period.
Difference in fiscal
periods is not more than 3 months
-->
Subsidiary's statements are acceptable for consolidation.
The effect of
(material) events
during the intervening period
--> should be
disclosed.
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