Associates, Joint Ventures and Subsidiaries are known as intercorporate investments. Just like individuals, companies can invest in other companies and own them legally. Each of the incorporate investment has a different treatment in the financial statements and it is important for investors to understand the differences and how it can impact the figures.

Subsidiaries (more than 50% ownership)

A company is known as a subsidiary when the parent company owns more than 50% of the former. The parent company has a controlling stake, and the acquisition method is used to account for the subsidiary’s finances. So much jargon! Allow me to explain. The financial numbers of the subsidiary will be combined with the parent’s financial statements. You would notice most of the financial statements have two main columns, Group and Company. Group refers to the combined accounts of the parent company and her subsidiaries while Company only includes the parent company’s finances. This is ......