Final answer:
The most important factor for ABC to consider for financial statement consolidation of XYZ is control, which can be determined by influence on operational and financial policies, not just ownership percentage. The decision to consolidate is crucial for providing financial statement readers with a complete picture of ABC's financial position.
Step-by-step explanation:
The most important factor ABC should consider when deciding whether or not to consolidate XYZ on its financial statements is control. Even though ABC does not own more than 50% of XYZ's voting stock, if ABC has the ability to exert significant influence over XYZ’s operating and financial policies, it may still require consolidation. Influence can be determined by factors such as representation on the board of directors, participation in policy-making processes, material transactions between the entities, interchange of managerial personnel, or dependency of one entity on the other.
When a large number of shareholders own a company, decision-making may become complex and the ability to govern or change management might depend on the composition of shareholder votes. For instance, in the problem described with The Darkroom Windowshade Company, investor 1 and 2 together hold 38,000 shares. To change the company's top management, a majority vote is likely required, meaning that these two investors would need more than 50,000 shares to ensure they can always get their way in how the company is run. Therefore, they would need to combine their shares with at least one other investor to achieve a majority.