So, it seems that a subsidiary having negative retained earnings does not cause the consolidation process to change. What are your thoughts on a parent company having negative retained earnings but the subsidiary having very profitable years and having a high net worth (retained earnings), would this cause changes to the consolidation process? Another thought here: In my opinion there would be certain situations where if I owned a large corporation, I wouldn't mind taking over companies that had negative equity depending on the situation. If I was acquiring a company that has a balance sheet with no cash, large fixed assets that were already close to full depreciation and some debt (negative equity position), to me it wouldn't be a bad deal to take them over as long as I could service the debt of the subsidiary. Basically, you would be acquiring a large amount of fixed assets that you can still physically use for multiple years for a reduced price. Your thoughts