Quick question on non controlling interest equity, interest, question, target

LorrinCFA

If Company A with $1,000 of equity acquires a 70% stake in Company B which has $500 in shareholder equity.  Assume book value = faire value and no goodwill (but I dont think it matters for this).
If we consolidate what is the consolidated entity’s shareholder equity?
Is it $1000 + $350 (70% * $500) = $1350 ?
Or is it $1000 + $150 (non controlling interest of 30%) = $1150 ?
Trying to be sure about what happens to the target’s equity.

slackeranalyst

On a balance sheet you would see Equity of 1,500 then a minority interest of (150) so when you add them up you’d have a total equity of 1,350.

amqata

Ok so the non controlling is negative in the equity section of the BS but you do add both company’s equity balance.  Thanks

defour44

Then why is it that for the control/acquisition method, they say that equity is more than proportionate consol/equity method by the amount of the goodwill..?

ogoluwa

too tired to give a proper answer here, but this info is wrong. don’t combine equity. only add minority interest.
also, always double check anything anyone tells you on AF. lots of misinformation.

MonkeyBusiness

Minority interest is NOT negative. It has to be positive for the balance sheet to balance…

prav_Cfa7

This is incorrect as well.

thommo77

jmachine is correct. definitely DO NOT add 350 to SE!

draz

lemiman, thank you for confirming. thought I was going crazy for a second.

tango_gs

Would it not depend if you issued stock to go forward with the acquisition or if you simply paid in cash? If you have to issue stock to buy them, then it means your shareholder’s equity rises by the purchase price and then you add MI on top… ARe we always to assume that they pay cash?