What is a subsidiary firm?

Question

What is a subsidiary firm?

Answer 1

It is a business entity owned or controlled (with the number of voting shares owned by the mother company) by another company or usually called a parent company.

Answer 2

Subsidiary: An entity, including an unincorporated entity such as a partnership, that is controlled by another entity (known as the parent).

Parent: An entity that has one or more subsidiaries.

Control: The power to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. Control is presumed when the parent acquires more than half of the voting rights of the enterprise. Even when more than one half of the voting rights is not acquired, control may be evidenced by power: [IAS 27.13]

- over more than one half of the voting rights by virtue of an agreement with other investors; or

- to govern the financial and operating policies of the other enterprise under a statute or an agreement; or

- to appoint or remove the majority of the members of the board of directors; or

- to cast the majority of votes at a meeting of the board of directors.