Hello,
I'm new in AS and as my current airline is my first ever in AS, I was wondering the following:
1) how starting a subsidiary, say with the minimum 3M AS$, affects the income statement (IS) of the parent company and where exactly is it registered in the IS?
2) is it possible for the the parent company to receive some kind of divident for the money it gave as initial capital to the subsidiary?
Any help would be appreciated.
Thank you in advance.
Subsidiary would affect income statement of the parent company only if it pays out dividends. Dividends are paid out only if the subsidiary is publicly traded, in which case a weekly 15% dividen calculated from profit is paid to shareholders based on proportional ownership. Subsidiaries do affect balance sheet of the parent though. If the subsidiary is not publicly traded it does not pay dividends, but you can transfer money though back to back aircraft sales and transfers without compensation combination of transactions.
Your income statement of your subsiste would be affected though during the aircraft transaction. 'Aircraft sale revenue' and 'Depreciation of flight equipment' are usually not the same. You will see losing money on the subsidy income statement, even though you are getting cash for it.
Great!
Thank you for your answers guys.
So basically as I understand from your answers if the parent company pays the 3M AS$ in the above example nothing is registered in the balance sheet of the parent company. The only thing that is registered is the bank account transaction and the reduction of your available AS$ in your account by 3M AS$.
Nice we will consider the subsidiary option in due time......!
Thank you again for your time guys.
Of course that 3 million is registered on the balance sheet, as equity investment.
Great thanks Rubio.
The asset part as code "1300 Investment" does not affect the income statement so that is in the end the answer I was looking for.
Thank you.