Financial Position and Control Types

A group of entities where one entity (the parent) controls another entity (the subsidiary), either directly or indirectly.

The power to govern the financial and operating policies of an entity to obtain benefits from its activities.

Control is presumed to exist when one entity owns more than 50% of the ordinary share capital (voting power) of another entity.

When one company directly owns more than 50% of another company's shares.

When one company controls another company indirectly through an intermediate company.

A subsidiary of a subsidiary, i.e., a company owned by a company that is itself owned by another parent company.

A situation where a group owns a controlling interest in another company, but might also hold additional direct investments in that company.

A group member can be included in the consolidated balance sheet even if they don't have a wholly-owned subsidiary if the group controls them through a controlling interest.

Profit made by a company (e.g., A Ltd) when selling goods internally to another company within the same group (e.g., B Ltd). This profit is recognized in the selling company's books but not in the consolidated group's balance sheet until the goods are sold to an external customer.

The value of inventory in a group company's balance sheet represents the cost at which the goods were purchased from another group company. This may not reflect the actual cost to the entire group.

The elimination of unrealized profit in inventory when preparing a consolidated balance sheet. This adjusts the inventory value to reflect the actual group cost.

The profit included in the inventory value of goods that haven't yet been sold to an external customer. This profit is unrealized from a group perspective.

The process of combining the financial statements of multiple companies into a single, unified report. This is done to present the financial performance of the group as a whole.

A company that is controlled by another company (the parent company). The parent company owns more than 50% of the subsidiary's voting shares.

The percentage of ownership that the parent company has in a subsidiary. This is typically expressed as a percentage of the subsidiary's voting shares.

When a parent company owns less than 50% of another company's voting shares, but still has significant influence over the company's operations.

The difference between the fair value of the investment in a subsidiary and the fair value of the subsidiary's identifiable net assets at the date of acquisition. This can either be positive (goodwill) or negative.

An intangible asset that arises when the purchase price of a subsidiary is greater than the fair value of its identifiable net assets.

An accounting adjustment that occurs when the purchase price of a subsidiary is less than the fair value of its identifiable net assets.

The fair value of a company's net assets at the date of acquisition, taking into account both the positive and negative adjustments needed to reflect fair value.

The adjustments made to the subsidiary's balance sheet at the date of acquisition to reflect the fair values of its assets and liabilities.

The profits or losses made by a subsidiary after the date of acquisition. These are included in the parent company's consolidated income statement.

Transactions between companies in a group where unrealized profits or losses need to be adjusted at the date of consolidation.

Adjustments to the retained earnings account to reflect dividends that have been proposed but not yet recorded.

Recording the income or expenses of a subsidiary in the parent company's financial statements as if the subsidiary was a part of the parent company from day one. This leads to a 'single' consolidated view.

The method used to account for the acquisition of one company by another. It involves valuing the investment at fair value and recognizing any difference as goodwill.

The method used to account for a business combination where shareholders of both companies are seen as joining together to form a new entity rather than one company acquiring another.