Definition
A sub-subsidiary is a company that serves as a subsidiary to another company, which itself is a subsidiary of an overarching parent company. This creates a layered corporate structure where the sub-subsidiary is indirectly controlled by the ultimate parent company through intermediary subsidiaries.
Examples
Example 1: Company A is a large multinational corporation. Company B is a wholly-owned subsidiary of Company A. Company C is a subsidiary of Company B. Therefore, Company C is a sub-subsidiary of Company A.
Example 2: ABC Corp owns DEF Inc. DEF Inc, in turn, has GHI Ltd as its subsidiary. GHI Ltd is the sub-subsidiary of ABC Corp.
Frequently Asked Questions (FAQs)
Q1: What is the main difference between a subsidiary and a sub-subsidiary?
A1: A subsidiary is directly controlled by the parent company, whereas a sub-subsidiary is an indirect subsidiary controlled through another intermediary subsidiary.
Q2: How does a sub-subsidiary structure affect financial reporting?
A2: Financial results of sub-subsidiaries are consolidated with the parent company’s financial statements. Each level of subsidiary must report its financials, which are then combined to present a complete picture.
Q3: Can a sub-subsidiary have its own subsidiaries?
A3: Yes, a sub-subsidiary can have its own subsidiaries, potentially creating multiple levels within a corporate structure.
Related Terms
- Subsidiary Undertaking: A company that is controlled by another company, known as the parent company.
- Parent Company: A company that has control over another company or companies.
- Consolidation: The process in accountancy to combine the financial statements of different subsidiaries and sub-subsidiaries into one set of financial statements for the group.
- Holding Company: A company that holds the majority of shares of another company, generally to control its policies and management.
Online References
Suggested Books for Further Studies
- “Financial Accounting: Tools for Business Decision Making” by Paul D. Kimmel, Jerry J. Weygandt, and Donald E. Kieso
- “Consolidated Financial Statements: A Step-by-Step Guide” by Jayne Maree Godfrey
- “Principles of Accounting” by Belverd E. Needles Jr. and Marian Powers
Accounting Basics: “Sub-subsidiary” Fundamentals Quiz
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