The proportionate consolidation method will least likely achieve the same results as the consolidation method because: 1) there are no minority interests 2) of the use of the equity method on the income statement 3) no joint ventures are included
1? #2 doesn’t make any sense and joint ventures are always done as proportionate consol (at least under IAS, I think for GAAP we dont’ really term it as “JV” and just use the consol method)
what do you mean by “Results”. whether you do PC or C – you get the same Net Income number. So there is no Minority interest in PC method. #2 is wrong #3 is also wrong. but that does not make #1 automatically right. Unless the definition of “Results” is correct. And actually they do want analysts to do the Prop. Consolidation method on any scenario to make sure apples to apples are being compared (from an analytical standpoint).
1
Maybe the wording of the question is throwing me off … the way I read this was “The proportionate consolidation method will NOT (instead of least likely) achieve the same results as the consolidation method because” Few things here Can a company report the same results if there are minority interest? I’m w/ cp on this one - depends what is meant by “results”. If its revenues, then no, if its net income then yes. However, the same would apply if there were NO minority interest right? specially since NI and Equity are the same all across the board (Equity, PC and C).
Although it’s (for the most part) not needed, a nice ancillary skill I’ve derived from Qbank and studying is determining what the question wants me to do, whether or not they’re wording it correctly or not. The second you see that question, you look for the buzzwords, and when I see that question, my mind instantly translates that as to “what is the difference between the two methods?”, and I picked #1 without even looking at the other two. There are numerous ways to overthink virtually every question - just put yourself in the question writer’s shoes, and ask yourself, “what does this person want me to demonstrate my knowledge of?” That’s what I do for the poorly worded questions, anyways.