How to Calculate Income From a Subsidiary

by Linda Ray

When you own more than 50 percent of the voting stock in another company, it then becomes a subsidiary of your company, partnership or joint venture. While the amount of voting stock that you hold plays an important role in how you calculate that income, other factors, such as the amount of your involvement in the company, also must be considered.

1. Determine what percentage of the company stock you own. You’ll need to verify the exact percentage to record the appropriate portion of the company earnings and the amount of dividends paid out to shareholders. For example, if you own 60 percent of the company, you may claim 60 percent of the earnings and dividends.

2. Consolidate the subsidiary's earnings into your own balance sheet. Subtract the non-controlling interest -- or the rest of the stock -- from the balance to come up with the net income of the subsidiary. You may add up all the non-controlling stock values and present them as one figure on your balance sheet. Use fair market value to record the price.

3. Add a separate column on your consolidated balance for partially owned subsidiary shares. Start with the beginning balance of your non-controlling interests. Include the percentage of earnings and dividends paid in proportion to your percentage of stock ownership. Use the ending balance to determine your non-controlling interest balance.

4. Include your share of the value of goodwill in your final accounting to determine your interests in the subsidiary. Goodwill is the difference between the fair market value of the company’s stock and the amount which you paid for it.


  • Your accounting could change if you own more than 50 percent of voting stock and the company is placed under court control in a bankruptcy proceeding. As a stockholder, you have the last claim on the assets of the company after creditors are paid off. Under a Chapter 7 bankruptcy, you often lose all your interest in the subsidiary.


  • In 2009, the Financial Accounting Standards Board issued guidelines to make the recording of equity in subsidiaries more transparent. You must clearly identify earnings and losses from subsidiary companies on your balance sheet when you use the consolidation method for reporting your controlling interest. Additionally, when the amount of your interest changes, the earnings must be clearly identified on your balance sheet using consistent fair value accounting methods.

Items you will need

  • Percentage of ownership figures
  • Subsidiary earnings statement

About the Author

Linda Ray is an award-winning journalist with more than 20 years reporting experience. She's covered business for newspapers and magazines, including the "Greenville News," "Success Magazine" and "American City Business Journals." Ray holds a journalism degree and teaches writing, career development and an FDIC course called "Money Smart."

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