The University of Chicago
Booth School of Business
Executive MBA Program

Financial Accounting

Chicago 12

Team Members

1. George Fischer 2. Gang Huang 3. Joshua Rademacher 4. Robert Gallo 5. Stanley Tara 6. Santosh Shankergowda

I pledge my honor that I have not violated the Booth Honor Code during this assignment.

GAAP Consolidated Financial Rules

Consolidated financial statements present the financial position and results of operations for a parent (controlling entity) and one or more subsidiaries (controlled entities) as if the individual entities actually were a single company or entity. Consolidation is required when a corporation owns a majority of another corporation’s outstanding common stock. The accounting principles applied in the
Preparation of the consolidated financial statements are the same accounting principles applied in preparing separate-company financial statements. Two companies are considered to be related companies when one controls the other company. Control is presumed to exist if the parent owns more than 50% of the voting stock of the subsidiaries. Consolidation requires full enumeration of revenues, expenses and asset transfers between companies.

Consolidated financial statements are presented primarily for the benefit of the shareholders, creditors, and other resource providers of the parent. Significantly, consolidated financial statements often represent the only means of obtaining a clear picture of the total resources of the combined entity that are under the control of the parent company. While consolidated financial statements are useful, some information is lost any time data sets are aggregated; this is