general electric ibm and scania among others have wholly owned finance subsidiaries 566688

General Electric, IBM, and Scania, among others, have wholly owned finance subsidiaries that make loans to customers who want to purchase the products of the parent company. The parent company consolidates the financial statements of these subsidiaries. These subsidiaries have billions of dollars of assets, mostly receivables; consolidation combines the parent’s assets—largely noncurrent manufacturing plant and equipment—with the more liquid assets of the finance subsidiary. Although a focus on liquidity analysis would suggest preparing separate statements for the manufacturing parent and for the financial subsidiary, these entities in fact operate as a single integrated unit so that consolidated financial statements more accurately depict their combined operations. However, nothing prevents the separate display of the finance subsidiary’s financial statements; General Electric follows this practice.