When Consolidation Is Required
The Concept of Control
Under U.S. GAAP, a parent consolidates an entity when it has a controlling financial interest. Most commonly, this means owning more than 50% of the voting stock. Certain entities, such as Variable Interest Entities (VIEs), may also require consolidation based on economic control.
Tip
Always determine the appropriate accounting method before attempting consolidation questions.
Summary
The existence of control—not merely ownership percentage—is the primary factor in determining whether consolidation is required.