when can a public company include a subsidiary in its financial report?

Question

What are the conditions for a US traded public company to include a partly owned subsidiary in its financial reports? Is there a way to include it in its reports if there is minority holding (<50.1%)?

Answer 1

You can, under IAS if you fulfil the criteria. IAS 27 defines a subsidiary as follows:
A subsidiary is an entity, including an unincorporated entity such as a partnership, that is controlled by another entity (known as the parent). Control is defined as the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Control also exists
when the parent owns half or less of the voting power of an entity when there is:
(a) power over more than half of the voting rights by virtue of an agreement with other investors;
(b) power to govern the financial and operating policies of the entity under a statute or an agreement;
(c) power to appoint or remove the majority of the members of the board of directors or equivalent governing body and control of the entity is by that board or body; or
(d) power to cast the majority of votes at meetings of the board of directors or equivalent governing body and control of the entity is by that board or body.

What this means is that you have a subsid even tho' you own <50.1% of the investee's equity, cos that is only the quantitative indicator. There is still the qualitative indicator of control. If you can prove that you have the power to control the investee, then that investee is your subsid and you have to consolidate its results.

I'm not familiar with US GAAP but I'm sure you have similar standards. Read the std on consolidation and look our for similar paras. as described above.