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).
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:
Funds contributed by owners in any business are different from all other types of funds. Equity is the residual value of the business enterprise that belongs to the owners or shareholders. The funds contributed by outsiders other than owners that are payable to them in the future. Liabilities are generally classified as Short Term (Current) and Long Term Liabilities. Current liabilities are debts payable within one year.
The general ledger is the central repository of all accounting information in an automated accounting world. Summarized data from various sub-ledgers are posted to GL that eventually helps in the creation of financial reports. Read more to understand the role and benefits of an effective general ledger system in automated accounting systems and ERPs.
Horizontal or Flat Organizational Structures
Flat organizational structure is an organizational model with relatively few or no levels of middle management between the executives and the frontline employees. Its goal is to have as little hierarchy as possible between management and staff level employees. In a flat organizational structure, employees have increased involvement in the decision-making process.
Concept of Representative Office
A representative office is the easiest option for a company planning to start its operations in a foreign country. The company need not incorporate a separate legal entity nor trigger corporate income tax, as long as the activities are limited in nature.
Operational Structures in Business
Large organizations grow through subsidiaries, joint ventures, multiple divisions and departments along with mergers and acquisitions. Leaders of these organizations typically want to analyze the business based on operational structures such as industries, functions, consumers, or product lines.
Network Organizational Structures
The newest, and most divergent, team structure is commonly known as a Network Structure (also called "lean" structure) has central, core functions that operate the strategic business. It outsources or subcontracts non-core functions. When an organization needs to control other organizations or agencies whose participation is essential to the success, a network structure is organized.
GL - Unearned / Deferred Revenue
Unearned revenue is a liability to the entity until the revenue is earned. Learn the concept of unearned revenue, also known as deferred revenue. Gain an understanding of business scenarios in which organizations need to park their receipts as unearned. Look at some real-life examples and understand the accounting treatment for unearned revenue. Finally, look at how the concept is treated in the ERPs or automated systems.
Shared Services is the centralization of service offering at one part of an organization or group sharing funding and resourcing. The providing department effectively becomes an internal service provider. The key is the idea of 'sharing' within an organization or group.
GL - Journal Posting and Balances
In this tutorial, we will explain what we mean by the posting process and what are the major differences between the posting process in the manual accounting system compared to the automated accounting systems and ERPs. This article also explains how posting also happens in subsidiary ledgers and subsequently that information is again posted to the general ledger.
Different Types of Organizational Structures
Modern business organizations run multiple product and service lines, operate globally, leverage large number of registered legal entities, and operate through complex matrix relationships. To stay competitive in the current global business environment, they must often develop highly diverse and complex organizational structures that cross international borders.
© 2023 TechnoFunc, All Rights Reserved