Investment in Subsidiary Equity Method
The equity method is accounting for investment when the parent company holds significant influence over the investee but not fully control. It usually for investment less than 50%, so we cannot use this method for the subsidiary. However, there is a case when the parent has an influence on the subsidiary but does have the majori…
Consolidation Entries For Subsidiary
- When the parent has legal control over the subsidiary, parent will consolidate subsidiary financial statement. It also means that parent has more than 50% of share voting right in the subsidiary. The consolidated financial statement is the combination of subsidiary and parent financial reports. The parent company will not record the investment in subsidiary, which we have seen in …
Accounting For Sale of Investment in Subsidiary
- Partial disposal of an investment in a subsidiary will have implications to the parent financial statement. If parent lost control over the subsidiary, we need to stop consolidation and recognize investment by using the equity method. We need to recognize the investment at fair value, and any subsequent gain or loss will impact the investment. It is no longer the subsidiary, but we need t…
Disadvantages of A Subsidiary
- The parent company will not be able to make a major decision related to the product, market, issue new share, and so on. The decision must be agreed upon by the other shareholders as well. The subsidiary management may not follow, and it cause many issues before any new policy is getting done. It is more complicated if we compare to the branch in which top management can …
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