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Lemu Co. and Young Co. are under the common management of Ego Co. Ego can significantly influence the operating results of both Lemu and Young. While Lemu had no transactions with Ego during the year, Young sold merchandise to Ego under the same terms given to unrelated parties. In the notes to their respective financial statements, should Lemu and Young disclose their relationship with Ego?

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Answer:

should Lemu and Young disclose their relationship with Ego?

Yes

Explanation:

Both Lemu and Young should disclose their relationship.

Since Ego can influence both Lemu and Young, and Lemu and Young are under the common management of Ego.

Lemu and Young are part of the consolidated entity of Ego. Therefore, that fact should be disclosed in both (subsidiaries) Lemu's and Young's financial statements.

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