Reporting Entity Amy and Brad Chen have been entrepreneurs for several decades and have established a relatively broad array of business holdings. Chen Enterprises is a corporation created some time ago. In addition to its primary business operation, the corporation holds all of the ownership of MidTown Corporation and is a one-third owner in a partnership that owns and operates a very successful small shopping mall. Last year, Amy started a travel agency that has its offices in the shopping mall and is operated by her as a sole proprietorship. Brad and Amy also have invested some of their personal savings in the stock of major corporations.

a. If financial statements are prepared for Chen Enterprises, which operations should be considered part of the relevant reporting entity?

b. If financial statements are prepared for Amy and Brad, how would the definition of the reporting entity change?

c. Why is it important to go beyond the definition of legal entity in establishing the reporting entity in this type of situation?