Which financial statement reflects the parent company’s investment in a subsidiary?

The balance sheet reflects the parent company’s investment in a subsidiary, as it provides a snapshot of a company's financial position at a specific point in time. This statement includes assets, liabilities, and shareholders' equity.

When a parent company owns a subsidiary, it typically records the investment in that subsidiary under non-current assets, often classified as "Investments in Subsidiaries" or "Investments in Affiliates." The value recorded represents the cost of the investment, adjusted for the parent’s share of the subsidiary’s profits or losses and any dividends received. Therefore, the investment in the subsidiary is clearly visible on the balance sheet.

The income statement illustrates revenues, expenses, and profits over a specific period but does not directly show the investment value. The cash flow statement focuses on cash inflows and outflows during a period, which means it also does not capture the value of investments in subsidiaries. The statement of changes in equity reflects changes in shareholders' equity but does not specifically detail investments in subsidiaries. Thus, it is on the balance sheet where this investment is aptly reflected, providing essential information to investors and stakeholders regarding the parent company's financial ties to its subsidiaries.