What
is subsidiary
When a company controlled
by another company, then first company known as subsidiary, while another
company known as parent company. For example an entity ABC & Co is
controlled by another entity XYZ, then entity ABC is subsidiary of XYZ
(parent).
How
subsidiary is controlled by parent company?
Subsidiary is said to be
controlled by the parent, if parent holds more than 50% share, or parent
controls the financial policy of subsidiary, or parent can appoint more than
50% director or parent have more than 50% voting rights in board meetings.
Does
Subsidiary prepare individual financial statements?
Yes, subsidiary does
prepare individual financial statements; subsidiary does not prepare
consolidated financial statements.
Does
Subsidiary prepare consolidated financial statements?
No, subsidiary does not
prepare consolidated financial statement, only parent company prepares
consolidate financial statements. Consolidated financial statement is prepared
in addition to individual financial statements of parents.
How
subsidiary appears in individual accounts of parent?
Subsidiary appears in
individual accounts of parent at cost. Subsidiary is reflected as line item
under heading of investment in subsidiary.
How
subsidiary is reflected in consolidated accounts?
Subsidiary is reflected in
consolidated accounts in the form of asset and liabilities i.e. assets and
liabilities of parent and subsidiary are combined reported. Similarly the
results of subsidiary and parent are also combined.
Does share capital of subsidiary is combined in consolidation?
No, in consolidation share
capital of subsidiary is not added with the parent share capital.
