Chapter 3 of Advanced Accounting discusses three consolidation techniques: cost, simple equity, and sophisticated equity.
Please respond to the following questions.
- With the three consolidation techniques in mind, what are the pros and cons of using each technique?
- When might a company prefer one technique to another? Why?
Consider the practice exercises you completed and the examples from the text in which consolidated net income always seems to be less than the sum of the parent’s and subsidiary’s separately calculated net income.
- Is it possible for consolidated net income to exceed the sum of each individual net income figure? Why or why not?