If one company owns more than 50% of the ordinary shares of another company,

Question

Quizplus · Accepted Answer

When one company owns more than 50% of the ordinary shares of another company, a parent-subsidiary relationship exists. This means that the owning company is known as the parent company, and the company whose shares are owned is known as the subsidiary company. The parent company has control over the subsidiary company, and as such, must consolidate the financial statements of both companies. The cost method is not used for consolidations. A partnership does not exist in this scenario, as that would imply equal ownership between the two companies. Liquidation of the subsidiary company is not necessary.

If One Company Owns More Than 50% of the Ordinary