Question

Research question: cut and paste the appropriate part of the FASB Codification that contains the rule. – the section reference, and the exact rule.

1. Find the FASB rules that define when one company is deemed to have control over a second one. (5 points)

Answer 1

FASB ISSUED what constitutes control of an entity. Under current rules, the condition for a controlling financial interest is ownership of a majority voting interest--unless control is temporary or does not rest with the owner of the majority voting interest. FASB's goal is to provide CPAs with better tools for analyzing complex corporate structures

The issue of when a subsidiary is sufficiently controlled by a parent to merit consolidated financial reporting goes back many years (see "A History of Consolidation Policy," below).

In the most recent step, FASB is trying to calm concerns by defining what constitutes control of an entity which, it says, will provide CPAs with better tools with which to analyze complex corporate structures. But is such a definition what critics really want? Some CPAs and other financial professionals believe existing standards are sufficient and adding more detail will only confuse financial report users.