Size of intercompany transactions that are eliminated

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Reference no: EM13787583

Consistency and comparability, not to mention relevance and reliability, are overarching themes of generally accepted accounting principles.

Please respond to all of the following prompts in the class discussion section of your online course:

Merchandise transactions such as sales among members of a consolidated firm are eliminated in the preparation of consolidated financial statements. Is this treatment accurate? Why or why not?

How does it affect the relevance and reliability of information presented to the financial statement users?

Depending on the size of the intercompany transactions that are eliminated, the financial statement activity might be considerably understated. Is this a problem? Why or why not?

How might a potential investor or creditor evaluate a firm differently if intercompany merchandise sales were not eliminated? Does that matter?

Reference no: EM13787583

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