Business, Legal & Accounting Glossary
Majority ownership is ownership of 50% or more of another company’s shares, or sufficient holdings that gives one company control of another company’s activities. When a (parent) company has majority ownership of a (subsidiary) company, the subsidiary must be consolidated on the parent company’s financial statements. In other words, if there is majority ownership of a subsidiary, the parent company and the subsidiary are treated as one company for reporting purposes. Under the accounting rule SFAS 94, there are only two exceptions to the consolidation requirement for majority ownership. First, if control of the subsidiary is expected to be only temporary, the consolidation rule for majority ownership does not apply. Second, if the parent company has majority ownership but does not control the subsidiary’s operations, the majority ownership rule does not apply. An example of the second exception would be when a company has majority ownership of a foreign subsidiary but cannot repatriate its earnings.
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This glossary post was last updated: 7th February, 2020 | 4 Views.