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noel

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tT
发表于 2011-7-13 16:04 | 只看该作者

Minority Interest

method, someone, interest, statements, little
Can someone explain minority interest a little bit more to me and how it might show up on the exam? I'm aware it's just the portion that the parent doesn't own under the acquisition method, but how does it effect FSA, statements, etc? Thanks
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Uranus08

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2#
发表于 2011-7-13 16:04 | 只看该作者
bro, better if u hit the book for this.
i ll be brief.

NCI is found under Aquisition method.
in most Aquisition, Parent company only purchases a certain % of the Sister company.
lets say A buys B for 80% of B's fair value of net asset.

the 20% is NCI and has to be added to A's Equity in consolidated balance sheet.

NCI differers under full and partial good will methods.
lets say: A buys B for $100, and B's net asset is 50.
full goodwill method: 100/0.80=125, 25 is NCI
partial goodwill method: 50X(1-0.80)=10 is NCI

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tarunajwani

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3#
发表于 2011-7-13 16:04 | 只看该作者
Actually what u posted makes sense; we're basically adding goodwill as NCI to the BS, correct?

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eoin

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4#
发表于 2011-7-13 16:04 | 只看该作者
brilliant post passme, thanks.

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kingstongal

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5#
发表于 2011-7-13 16:04 | 只看该作者
page 155 book2.

it says NCI under full goodwill is the percentage of minority interest x fair value. in your example, shouldnt that be 20%x 100. NCI= 20????


passme Wrote:
-------------------------------------------------------
NCI is found under Aquisition method.
in most Aquisition, Parent company only purchases a certain % of the Sister company.
lets say A buys B for 80% of B's fair value of net asset.

the 20% is NCI and has to be added to A's Equity in consolidated balance sheet.

NCI differers under full and partial good will methods.
lets say: A buys B for $100, and B's net asset is 50.
full goodwill method: 100/0.80=125, 25 is NCI
partial goodwill method: 50X(1-0.80)=10 is NCI

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benbenxiong

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6#
发表于 2011-7-13 16:04 | 只看该作者
Hmmm yeah I see that as well...can anyone clarify?


lzen5 Wrote:
-------------------------------------------------------
> page 155 book2.
>
> it says NCI under full goodwill is the percentage
> of minority interest x fair value. in your
> example, shouldnt that be 20%x 100. NCI= 20????
>
>
> passme Wrote:
> --------------------------------------------------
> -----
> NCI is found under Aquisition method.
> in most Aquisition, Parent company only purchases
> a certain % of the Sister company.
> lets say A buys B for 80% of B's fair value of net
> asset.
>
> the 20% is NCI and has to be added to A's Equity
> in consolidated balance sheet.
>
> NCI differers under full and partial good will
> methods.
> lets say: A buys B for $100, and B's net asset is
> 50.
> full goodwill method: 100/0.80=125, 25 is NCI
> partial goodwill method: 50X(1-0.80)=10 is NCI

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RMontgomery

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7#
发表于 2011-7-13 16:04 | 只看该作者
Where you have increased your Assets by 125 (with 100 going to identifiable assets and 25 going to goodwill), you need to increase your E/L by the same amount to balance.

Owners equity will increase by 100 and NCI will increase by 20%* fair value of acquired assets which in this case were 125) = 25


Where 100$ buys 80% of the fair value,
125$ buys 100%

80/100 = 100/x solve for x=125

This 125 is not what the acquired firm will report on their B/S given it is usually lower (see line in exam 'but the fair value of the property held by X Co. was 25m above book value')

To account for this, we increase goodwill.

To account for a holding of <100% we have NCI which is the % unowned * FV of assets when acquired

20% * 100 is not correct because 100m is just the purchase price, not the full fair value of assets of acquired company.

Bit rambling but I hope that helps.

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