Consolidating subsidiaries accounting
(hereafter Sub) to the point where Parent owns more than 50 percent of the common shares of Sub.Parent is then presumed to control all the activities and operations of Sub because Parent cannot be outvoted on any shareholder proposal.This method can only be used when the investor possesses effective control of the investee or subsidiary which often, but not always, assumes the investor owns at least 50.1% of the subsidiary’s shares or voting rights.
Investors complained that they didn’t know that the companies receiving payments even existed.
During the 2008 financial crisis several large banks made payments to other entities to help them avoid bankruptcy.
These payments surprised investors because the large banks were not consolidating the other entities, implying that the large banks weren’t responsible for them.
Such a parent could control large world-wide companies within which all operations are conducted.
The financial statements of just the parent company would not be very helpful to investors because they would consist of a few small assets and a one-line item titled something like “Investments in other companies.” With few details about the world-wide companies that the parent company controls (just a one-line description and investment amount) investors would struggle to understand the performance of the parent company and value it.focused on financial accounting disclosures and how you as a journalist can interpret and report on them.