CFA Practice Question

There are 334 practice questions for this study session.

CFA Practice Question

Which of the following is NOT a condition that would be likely to prevent a U.S. parent company from exercising enough economic control over a foreign subsidiary's resources and financial operations to warrant consolidation?
A. Restrictions on transfers of property in the foreign country.
B. Restrictions on foreign exchange in the foreign country.
C. The U.S. company does not have the staff necessary to perform the consolidation.
Explanation: The other statements all describe conditions which, if severe enough, may prevent a U.S. parent company from having the control over a foreign subsidiary that is necessary for the subsidiary to be consolidated. An unconsolidated foreign subsidiary is reported as an investment on the U.S. parent company's balance sheet. The parent company should use the equity method or the cost method to account for the investment, as appropriate. Letter C has no meaning in this context.

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