GAAP and Consolidation
The Generally Accepted Accounting Principles (GAAP) that are used in the United States issue very specific instructions on how companies should consolidate their financial reports when a merger or acquisition is accomplished. These instructions came as a result of the Enron scandal during the early 2000s, as the energy company shifted deadweight losses to subsidiary companies owned by executive staff to make its balance sheet look as profitable as possible. The losses were therefore hidden from public view, and contributed towards the impending financial collapse of the company. Because Enron led by example, the Financial Accounting Stability Board (FASB) ...
