Start Consolidating foreign subsidiaries uk gaap

Consolidating foreign subsidiaries uk gaap

The disadvantages to this type of structure include a concentration of risk and a loss of operational flexibility.

However, the parent company can still maintain significant control over the strategic direction of the subsidiary.

The advantages and disadvantages of this business model fall into financial, operational and strategic categories.

The interests of financial statement users are better served by alternative presentations of foreign currency denominated accounts rather than by consolidation.

Tax consolidation, or combined reporting, is a regime adopted in the tax or revenue legislation of a number of countries which treats a group of wholly owned or majority-owned companies and other entities (such as trusts and partnerships) as a single entity for tax purposes.

It can also use the subsidiary's earnings to grow the business or invest in other assets and businesses to generate a higher rate of return.

Additionally, the two companies can integrate their financial and other information technology systems to streamline business processes and reduce costs.

The degree of control varies, but it is implicit in the relationship.

For example, the parent company often initiates management changes at its wholly owned subsidiaries.

The speedy execution of strategic priorities is another advantage of a wholly owned subsidiary.

For example, a parent company could ask one of its foreign wholly owned subsidiaries to dedicate all of its resources toward a new product launch. Synergies in marketing, research and development and information technology mean cost efficiencies and long-term strategic positioning.

However, decision-making could be slow because of multiple management levels.