Sub-subsidiary

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§

1. 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.

2. 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§

• Investopedia
• Corporate Finance Institute
• Business Dictionary

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§

Thank you for deepening your understanding of corporate structures and the role of sub-subsidiaries in business hierarchy. Keep excelling in your journey through financial and accounting knowledge!