Unconsolidated Subsidiaries

An unconsolidated subsidiary is a company that is controlled by another company, but is not included in the parent company's financial statements. This can happen for a number of reasons, such as:

* The subsidiary is in a different country and the parent company does not want to have to comply with the local accounting standards.
* The subsidiary is in a different industry and the parent company does not want to have to consolidate its financial results with the subsidiary's.
* The subsidiary is in a start-up phase and the parent company does not want to include its results until it is more established.

When a subsidiary is unconsolidated, the parent company does not have to include its assets, liabilities, revenues, or expenses on its financial statements. This can make the parent company's financial statements look stronger than they actually are. However, it can also make it more difficult for investors to understand the parent company's financial position.

There are a number of different ways to account for unconsolidated subsidiaries. The most common method is to use the equity method. Under the equity method, the parent company records its investment in the subsidiary at cost. It then adjusts the investment account for its share of the subsidiary's profits or losses. The parent company also records its share of the subsidiary's dividends as income.

Another method of accounting for unconsolidated subsidiaries is to use the cost method. Under the cost method, the parent company records its investment in the subsidiary at cost. It does not adjust the investment account for its share of the subsidiary's profits or losses. The parent company also does not record its share of the subsidiary's dividends as income.

The choice of accounting method for unconsolidated subsidiaries depends on the specific circumstances of the parent company and the subsidiary.