Why the Holding Company Discloses the Valuable of Assets and Liabilities - Assignment Example

When a company owns more than 50% of shares in another company regardless of the percentage of ownership it has the ultimate control of the subsidiary company.

            In normal cases, Ordinary shareholders are regarded as the owners of the company, that is, they enjoy the residual returns and also make decisions on how the company will carry out its affairs. This kind of decision includes altering both the memorandum and articles of association where the need arises, as well as selecting the stewards to manage the company for them. In addition to this, ordinary shareholders are the only ones who have the exclusive rights of voting in either a general meeting or an extraordinary meeting (Elliott & Elliott, 2008).

            Therefore, considering the above discussion the holding company is justified to include the assets and the responsibility of a subsidiary company in the consolidated financial statement since with 51% of the share they control the operation of the subsidiary company without any objection if they were to vote on various investment to undertake, the holding company has the capacity to vote their preferred decision.

            The non-controlling interest or the minority interest, usually does not have the capacity to influence the decision-making process, thus they only participate in profit sharing, and should be included as underfinanced in the consolidated statement of financial position. Therefore, if non-controlling interest cannot account for the assets and liability then who will? (Elliott & Elliott, 2008)

In conclusion, the reason why the holding company discloses the value of assets and liabilities in fair values is that in comparison to the other asset held by the company they are the most liquid asset thus the need to disclose them in fair values.