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A Standard Setting Perspective on Current Issues Facing the Accounting Profession - page 12 / 29

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Defining the reporting entity:  consolidation

Quantitative approaches to defining control

Accounting Research Bulletin 51 (and most practice) refers to a controlling financial interest as the basis for consolidation

Convention => equity shares are the instruments that convey control, via voting

Control => use voting power to elect the governing board and to make other significant decisions

Analyze controlling financial interest by analyzing equity voting interests

Holder of majority of equity interest => control

Count the total number of votes.  A holder that has more     than half of the votes has a controlling financial  interest      and should consolidate

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