Consolidation∶ non-controlling interest.pptVIP

* * * * * * * * * * * * * * * * * * * * * * * * * Chapter 18 Consolidation: non-controlling interest Prepared by Emma Holmes AASB 10 defines non-controlling interest as “that portion of equity of a subsidiary attributable to equity interests that are not owned, directly or indirectly through subsidiaries, by the parent. Recall from chapter 15, that non-controlling interests are classified as a contributor of equity to the group NCI is presented and identified within equity separately from the parent’s equity The NCI is entitled to a share of the consolidated equity. The remainder of this lecture will examine how the NCI’s share of equity is calculated Nature and calculation of NCI Acquisitions analysis, BCVR entries and pre-acquisition eliminations Impact depends on the treatment of goodwill. Two options: Full goodwill method Partial goodwill method The investment is eliminated against parents shared subsidiary’s pre acquisition equity. Intragroup transactions The full effect of intragroup transactions are adjusted on consolidation regardless of the ownership interest held by the parent Effects of NCI on the consolidation process Effect of NCI on consolidation process – full goodwill method NCI measured at fair value on the basis of market price for shares not acquired by the parent. NCI receives a share of goodwill A Ltd acquired 60% of B Ltd for a cost of $150,000 Equity of B Ltd was $220,000 comprising share capital of $100,000 and retained earnings of $120,000. All amounts were recorded at fair value NCI in B Ltd had a fair value of $95,000 Consideration + NCI = 245,000 FVINA = 220,000 Goodwill = 25,000 Effect of NCI on consolidation process – full goodwill method BCVR entry DR Goodwill 25,000 CR BCVR 25,000 Pre-acquisition elimination entry DR Retained earnings 72,000 DR Share capital 60,000 DR BCVR 18,000 CR Shares in B Ltd 150,000 BCVR attributable to parent’s goodwill eliminated Cost $150