Process consolidating foreign currency subsidiaries

The consolidated balance sheet also includes foreign subsidiaries.

However, it is sometimes difficult to convert the financial statements of a foreign subsidiary back into the parent company's currency.

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Financial considerations are another issue that may influence the creation of a subsidiary, such as when a company wants to sell off an unprofitable business center without disrupting the overall operation of the business.

In this case, organizing it as a subsidiary and subsequently selling it off would achieve that goal.

A subsidiary is a company that is controlled by its parent company.

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Financial statements are prepared in the same way for the subsidiary as they are for the parent company.There are several advantages for the parent company in acquiring or forming a subsidiary.For example, a company may seek additional resources that another company can provide, a company might want to enter a new market that another company dominates, or a company with multiple brands may create subsidiary companies to keep its brand identities separate and increase brand recognition.However, the consolidated financial statements are of limited use to creditors or minor stockholders of the subsidiary.For example, a subsidiary’s creditors have a claim against the subsidiary alone, and they cannot expect payment from the parent company.

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