Question

Changing specific subsidiaries that constitute the group of companies for which consolidated financial statements are prepared is an example of a:

A. change in accounting estimate.
B. change in accounting principle.
C. change in segment reporting.
D. change in reporting entity.

Answer 1

A change in the specific subsidiaries of a group for consolidated financial statements is considered a change in reporting entity.

Step-by-step explanation:

Changing specific subsidiaries that constitute the group of companies for which consolidated financial statements are prepared is an example of a change in reporting entity. This change can occur when a parent company acquires or disposes of subsidiaries, or when there is a reorganization of the structure that changes the makeup of the group of companies reported on. It is different from a change in accounting estimate or principle, which relate to the methods used to calculate financial data, and from change in segment reporting, which would adjust how operations are reported without altering the group of entities.