At a recent staff meeting, the VP of Finance appeared confused. The controller has assured him that the parent company and each of the subsidiary companies had properly accounted for all transactions during the year. After several other questions, the VP finally asked, If it has been recorded properly, then why must you spend so much time and make so many changes to the amounts reported by the individual companies when you prepare the consolidated financial statements each month? You should be able to just add the reported balances together.

Provide an answer to the VP of Finance, using a memo format. Support your response by including FASB references. Compare and contrast the FASB (GAAP) methodology with that on IASB (IFRS).