Month End Glossary

Subsidiary

A subsidiary is a company controlled by another company, known as the parent company.

A subsidiary is a business entity that is owned or controlled by another entity, referred to as the parent company. The control typically arises when the parent company owns more than 50% of the voting stock of the subsidiary. This arrangement allows the parent company to influence the subsidiary's management and make decisions regarding its operations and policies.

From an accounting perspective, subsidiaries are significant in consolidated financial reporting. The financial results of the subsidiary are combined or consolidated with those of the parent company, providing stakeholders with a comprehensive overview of the consolidated entity's performance.

For example, consider Corporation A, which owns 80% of the voting shares of Corporation B. In this case, Corporation B is a subsidiary of Corporation A as Corporation A has the ability to control Corporation B's decisions and policies. Terms related to subsidiaries include "consolidation," "parent company," and "joint venture."

Related Terms

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