Concept of Subsidiaries
A subsidiary is a company that is completely or partly owned by another corporation that owns more than half of the subsidiary's stock, and which normally acts as a holding corporation which at least partly or wholly controls the activities and policies of the daughter corporation.
A subsidiary is a company that is completely or partly owned by another corporation that owns more than half of the subsidiary's stock, and which normally acts as a holding corporation which at least partly or wholly controls the activities and policies of the daughter corporation. The controlling entity is called its parent company, parent, or holding company. Subsidiaries are a common feature of business life, and all multinational corporations organize their operations in this way.
A subsidiary may itself have subsidiaries, and these, in turn, may have subsidiaries of their own. A parent and all its subsidiaries together are called a "group", although this term can also apply to cooperating companies and their subsidiaries with varying degrees of shared ownership. Examples include holding companies such as Berkshire Hathaway, Time Warner, or Citigroup; as well as more focused companies such as IBM or Xerox. These, and other MNCs, organize their businesses into national and functional subsidiaries, often with multiple levels of subsidiaries.
Subsidiaries are separate, distinct legal entities for the purposes of taxation, regulation, and liability. For this reason, they differ from divisions, which are businesses fully integrated within the main company, and not legally or otherwise distinct from it. A parent company may own one or more subsidiaries, in which case each of its subsidiaries are known as ‘sister’ companies to one another.
For the purposes of liability, taxation and regulation, subsidiaries are distinct legal entities. A subsidiary can sue and be sued separately from its parent and its obligations will not normally be the obligations of its parent. If a parent company owns a foreign subsidiary, the company under which the subsidiary is incorporated must follow the laws of the country where the subsidiary operates, and the parent company still carries the foreign subsidiary's financials on its books (consolidated financial statements).
Foreign Subsidiary:
In subsidiary structure the inbound company incorporates a wholly owned subsidiary in the foreign country, making it a distinct legal entity separate from the parent company. Subsidiary incorporated by a foreign company generally is not subject to specific restrictions/limitations with respect to its activities other than the general limitations applicable to domestic entities as well. The profits earned by a foreign subsidiary are liable to tax as per the local laws and regulations of the country of operation.
The Walt Disney Company has more than 50 Subsidiaries (https://www.sec.gov/Archives/edgar/data/1001039/000100103917000198/fy2017_q4x10kxex21.htm).
Given below are some of its foreign subsidiaries:
- Disney FTC Services (Singapore) Pte. Ltd, Singapore
- Euro Disney Associes S.C.A. France
- Hong Kong Disneyland Management Limited, Hong Kong
- Shanghai International Theme Park Company Limited, China
- UTV Software Communications Limited, India
Related Links
You May Also Like
-
Learn the typical accounting cycle that takes place in an automated accounting system. We will understand the perquisites for commencing the accounting cycle and the series of steps required to record transactions and convert them into financial reports. This accounting cycle is the standard repetitive process that is undertaken to record and report accounting.
-
There are two commonly used methods of accounting - Cash Basis and the Accruals Basis. Understand the difference between accruals and reversals. Recap the earlier discussion we had on accruals and reversals and see the comparison between these two different but related accounting concepts. Understand how the action of accruing results in reversals subsequently in the accounting cycle.
-
Functional Organizational Structures
A functional organizational structure is a structure that consists of activities such as coordination, supervision and task allocation. The organizational structure determines how the organization performs or operates. The term organizational structure refers to how the people in an organization are grouped and to whom they report.
-
What Is a General Ledger? General Ledger (also known in accounting as the GL or the Nominal Ledger) is at the heart of any accounting system. A general ledger is the master set of accounts that summarize all transactions occurring within an entity. Ledger is the skillful grouping and presentation of the Journal entries. Learn the accounting fundamentals, general ledger process, and general ledger flow.
-
Divisional Organizational Structures
The divisional structure or product structure consists of self-contained divisions. A division is a collection of functions which produce a product. It also utilizes a plan to compete and operate as a separate business or profit center. Divisional structure is based on external or internal parameters like product /customer segment/ geographical location etc.
-
An account inquiry is a review of any type of financial account, whether it be a depository account or a credit account. In this tutorial, you learn what we mean by drill through functionality in the context of the general ledger system. We will explain the concept of drill-down and how it enables users to perform account and transaction inquiry at a granular level and the benefits of using this functionality.
-
What is a Business Eco System?
The goal of a business is to generate capital appreciation and profits for its owners or stakeholders by engaging in provision of goods and services to customers within the eco system/framework governed by respective laws(local/international). The eco system involves various entities that the business works with for delivery of a product or service.
-
Understand what we mean by GAAP to STAT adjustments. This article discusses the different standards that are used for multiple representations of the financial results for global organizations. Understand the meaning of US GAAP, Local GAAP, STAT, IFRS, and STAT. Finally, understand why accounting differences arise and how they are adjusted for different financial representations.
-
Generally Accepted Accounting Principles define the accounting procedures, and understanding them is essential to producing accurate and meaningful records. In this article we emphasize on accounting principles and concepts so that the learner can understand the “why” of accounting which will help you gain an understanding of the full significance of accounting.
-
In this article we will focus on and understand the accounting process which enables the accounting system to provide the necessary information to business stakeholders. We will deep dive into each of the steps of accounting and will understand how to identify accounting transactions and the process for recording accounting information and transactions.
