Unconsolidated subsidiaries, also referred to as investments in associates, investments in affiliated companies, and equity investments, are businesses wherein a firm has a significant stake that falls short of control, which equates to a 20% to 50% stake, and as such, they come under equity method accounting.
“Non-Operating Unconsolidated Subsidiaries, an Invested Capital Adjustment”, Joseph Noko
Where the unconsolidated subsidiary’s income is disclosed, I consider that income as operating and add it to my calculation of the parent company’s NOPAT, and invested capital and where it is not, I consider it as non-operating and it does not form part of my calculation of NOPAT, given the figures are undisclosed, and invested capital, and is added to my calculation of economic book value (EBV), just as if it were excess cash.