What is it about?
Firms tend to optimize their financial reporting strategies taking advantage of any discretion and flexibility allowed by the investment accounting standards to avoid accounting treatments that they regard as being less favorable.
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Why is it important?
From an investors' standpoint, it can be challenging comparing the financial statements of companies that could really consolidate subsidiaries under a principles based approach, that aren't because companies' are using the historic 50% rules instead.
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This page is a summary of: Firm Equity Investment Decisions and U.S. GAAP and IFRS Consolidation Control Guidelines: An Empirical Analysis, Journal of International Accounting Research, March 2017, American Accounting Association,
DOI: 10.2308/jiar-51657.
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