There is one time where we can ignore the children in a derivation tree, and that's if some entity owns full rights to some expression. This is often the case for music. Large music companies often buy all of the rights to some band's song. As long as the band had the right to all other expressions they may have used to create that song (like sounds from sound effect libraries), and all rights are transferred to the music company, then there is no need to show the children of the song on any graph the song may appear in, because the status of the children has been made irrelevant. The music company, and by extension its customers, do not need to worry that some piece of the song may not be used in certain contexts. The music company has effectively encapsulated the rights of that song and made it as if the song was a totally original expression.
This is strong encapsulation. If we are only concerned about some subset of activities, such as publishing a magazine, then we can drop off the parts of the rights transfer that don't matter to whatever we're concerned about, and we'll see weak encapsulation, which happens all the time. For example, in the magazine page we say the "Advertiser" owns the "Advertisement Copy", even though in reality the copy was written by some individual, who immediately transfered that copyright to the advertising company since it was a work for hire. Since the transfer was full, the Advertising Copy's original owner is hidden by the encapsulation, and we can say that the Advertiser owns it. For a more relevant example to you personally, you do not need to worry about the legality of using the clip art that Microsoft Office ships with; if you read your EULA closely, I believe you will find that one of the few rights actually granted to you and not reserved for Microsoft are the rights to use those pictures in most any way you would care to use them. (Of course this can change anytime, so don't take my word for it.) You can't resell them, but who really cares? For the sake of simplicity, we usually just encapsulate the rights and pretend we have full rights to them.
Notice that with both of these encapsulations, the tree is simplified substantially. The magazine need not worry about whether or not the advertisement violates any copyright, because the advertiser takes care of that. The simplification in the tree reflects the simplification in reality. In the previous paragraph, when I speak of encapsulating the rights to the advertising copy, I am really referring to the mental model you would use. These 'derivation trees' are simplified models of the real trees.
Unfortunately, encapsulation totally depends on the fact that the only type of derivative works are the ones so far described. The ability to encapsulate depends on the ability to make reasonable assumptions about what a person can do to an object. Not to beat a dead horse, but in the static domain, all one can do is copy and use in an expression.