What is the logic of reporting minority interest under equity when the parent doesnt own minority interest?作者: RMontgomery 时间: 2013-4-5 22:54
Here’s the logic.
This assumes the Acquisition method (last year known as the Consolidation method). You have a majority ownership with significant influence in the investee. You have consolidated all assets, liabilities, revenues, and expenses. However, someone owns a minority share in your investee, and you cannot book the total NI to equity because it is not all your’s. Thus, you create a single line item ‘minority share interest’ that reduces the investment to your proportionate share.作者: sgupta0827 时间: 2013-4-5 22:54
Agree with David. Thinking of it another way:
Say, you have control on a Subsidiary, though you dont own it 100%. Since you have decision making power, the risk is extended to all assets of the sub and not just the portion of assets you own. This is the logic, why you need to report all Assets and all Liabilities of a Sub, when you have significant control. Such a balance sheet would better reflect the economic reality in terms of risks.
Now that you have reported excess assets and liabilities, the net excess needs to be balanced. NCI in equity is what balances it.
