Question

3) Magic Co. holds 100% of the outstanding common stock of Jonson Co. and would like to prepare year-end (December 31, Year 2) consolidated financial statements. The separate financial statements of Magic Co. are prepared for fiscal year ending December 31, Year 2. Jonson Co. reports its separate financial statements for the fiscal year ending June 30, Year 1.

Research and cite a specific paragraph in the Accounting Standard Codification that can help Magic Co. to determine whether it can use the financial statements of Jonson Co. (from June 30, Year 1) for preparing the consolidated financial statements for the fiscal year ending December, 31, Year 2, without any adjustments. Unless specifically requested, your response should not cite implementation guidance and illustrations.

FASB ASC                               -                   -                   -

Answer 1

Key compliance requirements:

i. CFS is to be prepared and laid before an AGM, in addition to SFS. Audited accounts of the listed companies, along with those of the subsidiaries, have to be made available on the website.

ii. Audited accounts of all of the subsidiaries are required to be prepared and provided to shareholders on request

Further, Where a company has one or more subsidiaries, it shall, in addition to financial statements provided under sub-section (2), prepare a consolidated financial statement of the company and of all the subsidiaries in the same form and manner as that of its own which shall also be laid before the annual general meeting of the company along with the laying of its financial statement.

Thus in this case, Johnson Co. should prepare its financial statement till year end (December 31, Year 2) and then present its financial statement for consolidation to Magic Co.