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Subsidiary vs. Associate: What's the Difference?

By Janet White || Published on February 13, 2024
Subsidiary refers to a company controlled by another. Associate refers to a firm with significant influence, but not control, from another.

Key Differences

A subsidiary is a company that is completely or majority-owned and controlled by another company, known as the parent company. An associate, however, is a company in which another company has significant influence, typically through a minority ownership.
In terms of financial control, subsidiaries are included in the consolidated financial statements of the parent company. In contrast, investments in associates are typically accounted for using the equity method in financial statements.
The level of control is a key difference: subsidiaries are under the direct control of their parent company, allowing significant influence over business decisions. Associates afford a lesser degree of influence to the investor, who cannot exert full control but can impact some decisions.
From a corporate governance perspective, the parent company can appoint a majority of the board of directors in a subsidiary, ensuring control over corporate policies. In an associate, the investor may have representation on the board but not to the extent of controlling it.
The strategic role also differs: subsidiaries often serve as integral parts of the parent company's operations, aligning closely with its strategic objectives. Associates, meanwhile, are more independent entities, with the investing company having a significant, but not controlling, interest.

Comparison Chart

Ownership and Control

Majority or complete ownership by parent company.
Minority ownership with significant influence.

Financial Reporting

Included in parent's consolidated financial statements.
Accounted for using the equity method.

Level of Control

Direct control and decision-making power.
Significant influence but not full control.

Corporate Governance

Parent can appoint a majority of the board.
Investor may have board representation but not majority.

Strategic Role

Integral part of parent's operations.
More independent, less aligned with investor's strategies.

Subsidiary and Associate Definitions


A company owned by another.
XYZ Corporation operates as a subsidiary of ABC Holdings.


A firm with minority interest by another.
DEF Ltd. is an associate of GHI Inc., with a 30% stake.


Under parent company's direct control.
The subsidiary adopted new policies in line with its parent company's strategy.


Influence without full control.
Although an associate, the company maintained considerable autonomy from its major investor.


Part of parent's consolidated financials.
The subsidiary's financial results are consolidated into the parent company's reports.


May have investor representation on the board.
The associate had two board members from the investing company, reflecting significant influence but not control.


Parent company controls board appointments.
The subsidiary's board members were primarily appointed by its parent company.


Financials reported under the equity method.
The associate's financials were accounted for using the equity method in the investor's books.


Operations closely aligned with parent.
As a subsidiary, the company's products complemented the parent's offerings.


Operates independently, with some investor influence.
The associate company pursued its own strategic goals, albeit with input from its major shareholder.


Serving to assist or supplement; auxiliary.


To connect in the mind or imagination
"I always somehow associate Chatterton with autumn" (John Keats).


Secondary in importance; subordinate.


To connect or involve with a cause, group, or partner
Wasn't she associated with the surrealists?.


How is an associate company defined?

An associate is a company where another company holds a minority stake, allowing significant influence but not full control.

What level of ownership defines an associate?

An associate is typically defined by a significant minority ownership, often between 20% to 50%.

What financial control does an investor have over an associate?

Investors in an associate have significant influence but do not control financial and operational policies.

How are subsidiaries governed?

Subsidiaries are governed by boards often controlled or significantly influenced by the parent company.

Can a subsidiary have its own brand identity?

Yes, a subsidiary can have its own brand identity, although it may be linked to the parent company's brand.

What is a subsidiary company?

A subsidiary is a company that is majority or wholly owned and controlled by another company.

Can a subsidiary operate independently?

While subsidiaries may have some operational autonomy, they are generally closely controlled by the parent company.

Is it possible for an associate to become a subsidiary?

Yes, if the investing company increases its stake to a majority, the associate can become a subsidiary.

Can an associate company issue its own stocks?

Yes, associate companies can issue their own stocks, separate from the investor company.

Are subsidiaries included in parent company's balance sheet?

Yes, subsidiaries are included in the consolidated financial statements of the parent company.

Do subsidiaries have their own legal identity?

Yes, subsidiaries are separate legal entities, even though they are controlled by a parent company.

How does a company benefit from having subsidiaries?

Subsidiaries can expand a company's reach, diversify its portfolio, and consolidate market position.

How does the parent company influence a subsidiary?

The parent company influences a subsidiary through ownership control, board composition, and strategic directives.

Can a subsidiary have its own subsidiaries?

Yes, a subsidiary can have its own subsidiaries, known as "sub-subsidiaries."

How is investment in an associate reported?

Investments in associates are reported using the equity method in financial statements.

Are associates considered part of a conglomerate?

Associates are not typically considered part of a conglomerate, as they maintain a higher level of independence.

What are the risks of investing in an associate?

Risks include limited control over operations and reliance on the associate's management for performance.

What is the significance of board representation in an associate?

Board representation in an associate allows the investor to exert influence without having full control.

What is the key difference in control between a subsidiary and an associate?

The key difference lies in the level of control - subsidiaries are controlled by the parent company, while associates are not.

How do market conditions affect associates and subsidiaries?

Market conditions can differently impact associates and subsidiaries based on their level of integration and independence.
About Author
Written by
Janet White
Janet White has been an esteemed writer and blogger for Difference Wiki. Holding a Master's degree in Science and Medical Journalism from the prestigious Boston University, she has consistently demonstrated her expertise and passion for her field. When she's not immersed in her work, Janet relishes her time exercising, delving into a good book, and cherishing moments with friends and family.

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