Which of the following is the best theoretical justification for consolidated financial statements?

 Which of the following is the best theoretical justification for consolidated financial statements?

Multiple Choice

In form, the companies are one entity; in substance, they are separate.


In form, the companies are separate; in substance, they are one entity. Correct

In form and substance, the companies are one entity.


In form and substance, the companies are separate.

Explanation
4.

The companies are each separate legal entities, but in substance they are one economic entity.

(In form, the companies are one entity; in substance, they are separate.) Incorrect. The companies are not one in form, each company is a separate legal entity.
(In form and substance, the companies are one entity.) Incorrect. The companies are not one in form, each company is a separate legal entity.
(In form and substance, the companies are separate.) Incorrect. The companies are one in substance as they are one economic entity.