Subsidiary
In one sentenceA company controlled by another company called the parent, meaning the parent has power to direct its relevant activities and its returns are affected by the subsidiary's results.
Simply put
The test for a subsidiary is control, not the ownership percentage alone. Owning more than half usually gives control, but control can exist with a smaller share if an agreement gives the right to appoint management.
Once control is established, the parent prepares consolidated financial statements that include the subsidiary (under IFRS 10).
Example
A trading company owns 70% of a distribution company and appoints most of its board members, so the distribution company is its subsidiary; its items are combined in the consolidated statements, and the other partners' share (30%) appears as non-controlling interests.
Don't confuse it with
BranchA branch is part of the business itself with no separate legal personality, while a subsidiary is a legally independent company.