Unconsolidated Finance Subsidiaries: Characteristics And De

Although the Financial Accounting Standards Board (FASB) still is working on its Major Project on "Consolidations and the Equity Method," it recently issued Statement 94, which has a major effect of requiring inclusion of nonhomogeneous subsidiaries in consolidated financial statements. An analysis of certain aspects of the finance subsidiaries of 89 New York Stock Exchange firms, based on the 83/84 Annual Report File of the National Automated Accounting Research System database, provides several conclusions relevant to the "Consolidations" project. First, the decision to consolidate finance subsidiaries will have a major impact on certain industries, especially heavy equipment manufacturers and merchandise retailers. Second, the footnote disclosures reveal that the parent-subsidiary interrelationship was not clearly disclosed. The percentage of the subsidiary's receivables that were obtained from the parent was not provided. Also, few companies provided detailed descriptions of their responsibility for subsidiary debt coverage and asset collectibility.