Consolidation refers to the settlement of accounts by considering a company group such as a parent company or subsidiary as one company. However, in addition to simply summing up the settlement of the parent company and subsidiary companies, we will do procedures such as eliminating transactions between the groups. First of all, a subsidiary is a company whose decision is made by the parent company. In the case of the company, if the company holds the shares of the subsidiary, the parent company will have control over it. In the case where the parent company has substantial control of the subsidiary, we will incorporate the accounting treatment into the parent company so we refer to those that are included in the parent company’s financial statements as consolidated financial statements. A consolidated subsidiary is a term used for accounting and company calculations and refers to a subsidiary that appears in the consolidated financial statements of the parent company in its entirety. It can be said that a consolidated subsidiary is controlled by the parent company. Since it is a subsidiary, it will become a completely different company, but if it is completely controlled by the parent company and it will continue, it is easier to understand who incorporated it in the parent company’s financial statements.
Temporary investment by M & A is not treated as a consolidated subsidiary
However, if control is temporary, it is excluded as an exception. If consolidated subsidiaries change, the consolidated financial statements will change significantly. This may make it difficult to understand the changes in business performance over time. However, temporary control is excluded as an exception so that it does not become so. Considering the assets, sales, etc. of subsidiaries, even if they are excluded from the scope of consolidation, those that are not material enough to not impede reasonable judgment regarding the financial condition, business performance, and cash flow situation of the corporate group , It can not be included in the scope of consolidation. All other subsidiaries are consolidated subsidiaries of the parent company. So in the case of temporarily investing through company sale or M & A, it will not be treated as a consolidated subsidiary, and it will not be covered by cases where there is a risk of misjudgment of stakeholders by consolidation. In either case M & A for the purpose of selling the company, considerable changes will occur at each timing. Therefore, in this case, it is more advantageous to not be a consolidated subsidiary, so it will be treated as an exception.