subsidiary

Examples of subsidiary in the following topics:

• Fully Owned Subsidiary

• Becoming an International Bank

  • The U.S. bank establishes a subsidiary.
  • Subsidiary can accept deposits from both U.S. residents and foreigners but can only grant loans for international business activity.
  • Method 3: A foreign bank enters the U.S. market through a subsidiary U.S. bank.
  • Thus, the foreign bank controls the U.S. bank, converting it into a subsidiary.
  • Many foreign banks use subsidiaries to enter the U.S. banking market because the U.S. has an extremely complex legal system.

• Methods of Paying Dividends

  • Stock or scrip dividends are those paid out in the form of additional stock shares of the issuing corporation or another corporation, such as its subsidiary corporation.
  • Property dividends or dividends in specie (Latin for "in kind") are those paid out in the form of assets from the issuing corporation or another corporation, such as a subsidiary corporation.
  • For large companies with subsidiaries, dividends can take the form of shares in a subsidiary company.

• Corporations

  • Corporations can buy other corporations.For instance, a parent corporation can have many subsidiaries, and the parent company does not fully integrate the subsidiaries into the parent corporation.Corporations develop these complex structures because of lawsuits, taxes, and regulations.Unfortunately, lawsuits are common and excessive in the U.S.If a successful lawsuit bankrupts a subsidiary, only that subsidiary is impacted.For example, a judge sued a dry cleaner for $65 million because the dry cleaner lost his pants.Although the dry cleaner foundthe judge's pants a week later, the lawsuit bankrupted the dry cleaner.In another example, a corporation owns 10 different apartment complexes.A corporation establishes each apartment complex as a separate, legal entity.If a tenant is injured on one property, he or she can sue the complex that limits the lawsuit to one subsidiary.
  • Corporations can use subsidiaries to avoid regulations or avoid taxes.For instance, a parent corporation could relocate to the Bahamas or Cayman Islands.These countries are tax havens with low taxes, little regulations, and strong confidentiality laws.Consequently, corporations can shift assets and liabilities among subsidiaries to decrease their overall tax burden.At this point, we clarify some tax terminology.Tax evasion is a person or corporation owes a government for taxes, but refuses to pay it.Some activity created the tax liability, and the law requires them to pay taxes.Otherwise, government can assess fines or send the tax evaders to prison.However, corporations can use tax avoidance because they can afford to hire specialists.Tax avoidance is the managers careful plan the corporate activities and prevent the creation of tax liabilities.

• Functions of International Banks

  • For example, Citibank has branches and subsidiaries in many countries around the world.
  • If the regulatory agency believes a bank is participating in risky investments, the regulatory agency has difficulty examining bank records for subsidiaries located in offshore markets.

• Chapter Questions

  • Could a corporation use a subsidiary to hide debt or manipulate its financial statements?

• Expanding into Foreign Countries

  • Reason 10: A company investing in a foreign market today may lead to future investments.For example, a company opens a subsidiary in Moscow, Russia.After establishing the subsidiary, the company can open branches in other Russian cities or enter other Russian speaking countries.
  • Reason 12: Many companies relocate subsidiaries to politically safe and business-friendly countries, such as the Bahamas, Dubai, and Singapore.These countries have low taxes and few regulations.

• Other Comprehensive Income

  • Gains and losses resulting from the translation of the financial statements of foreign subsidiaries from the foreign currency to the reporting currency

• Reporting Financing Activities

  • In the case of more advanced accounting situations, such as when dealing with subsidiaries, the accountant must:

• Defining Dividends

  • Thus, if a person owns 1000 shares and the cash dividend is USD 0.90 per share, the holder of the stock will be paid USD 900.Stock dividends (also known as scrips) are payments in the form of additional stock shares of the company itself or one of its subsidiaries, as the name suggests.
  • Property dividends or dividends in specie (Latin for "in kind") are those paid out in the form of assets from the issuing corporation or another corporation, such as a subsidiary corporation.