When the ownership percentage of stock exceeds 20 percent but is less than 50 percent, gaap presumes that the investor:_______.

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28-07-2022
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When the ownership percentage of stock exceeds 20 percent but is less than 50 percent, gaap presumes that the investor:_______.

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Tutorconsortium323 Tutorconsortium323 · Answer 1 · 2022-08-05T19:55:53+02:00

When the ownership percentage of stock exceeds 20 percent but is less than 50 percent, Gaap presumes that the investor: is able to exert influence over the investee company.

What is Consolidation Rules Under GAAP?

The general rule requires consolidation of financial statements when one company's ownership interest in a business provides it with a majority of the voting power -- meaning it controls more than 50 percent of the voting shares. But even if your company's equity or voting interest is 50 percent or less, consolidation may still be required. In the absence of owning a majority of the equity, extensive contractual agreements or other business arrangements between two enterprises may be sufficient to establish the requisite control that warrants consolidating financial statements.

The Principles of GAAP-

The four basic constraints associated with GAAP include

Objectivity.
Materiality.
Consistency.
Prudence

Learn more about GAAP on:

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