A Occurs when the shares are exchanged for shares of the parent, there leading to a reduction in the outstanding shares of the parent company. Because a subsidiary is a separate legal entity, the risk associated with the activities is limited.

Business Objectives A subsidiaryis a corporation that is controlled another corporation, referred to as a parent company.Control is usually through majority ownership of its common stock. Disposing of a portion of existing operations Development of Complex Business Structures Size often allows economies of scale New earning potential Earnings stability through diversification Management rewards for bigger company size Prestige associated with company size Business Expansion A Occurs when the ownership of a newly created or existing subsidiary is distributed to the stockholders without the stockholders surrendering any of their stock in the parent company. Helps establish clear lines of control and facilitate the evaluation of operating results 2. Preview text Disusun oleh : Muhammad Firman (Akuntansi FE UI 2012) AKUNTANSI KEUANGAN LANJUTAN 1 CHAPTER 1 INTERCORPORATE ACQUISITIONS AND INVESTMENTS IN OTHER ENTITIES Motivating factors: 1.

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