When preparing a Consolidated Statement of financial position, the pre-acquisition portion of subsidiary’s retained earnings needs to be frozen by offsetting it from the cost of investments. Which of the following is/are the reason(s) for this?

(a) That portion of profit has been paid for by the parent as part of its investment

(b) It is not ethical for the parent to claim profits made before a company became a subsidiary

(c) To establish the true cost to the parent of acquiring the subsidiary’s goodwill

(d) Otherwise group profits are inflated by acquiring subsidiaries with high retained earnings

Transcribed Image Text:

wb & d x b&c ya & c z c&d