标题: Quick question on non controlling interest [打印本页] 作者: LorrinCFA 时间: 2013-4-22 06:53 标题: Quick question on non controlling interest
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.作者: slackeranalyst 时间: 2013-4-22 06:53
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.作者: amqata 时间: 2013-4-22 06:54
Ok so the non controlling is negative in the equity section of the BS but you do add both company’s equity balance. Thanks作者: defour44 时间: 2013-4-22 06:54
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..?作者: ogoluwa 时间: 2013-4-22 06:54
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.作者: MonkeyBusiness 时间: 2013-4-22 06:55
Minority interest is NOT negative. It has to be positive for the balance sheet to balance…作者: prav_Cfa7 时间: 2013-4-22 06:55
This is incorrect as well.作者: thommo77 时间: 2013-4-22 06:56
jmachine is correct. definitely DO NOT add 350 to SE!作者: draz 时间: 2013-4-22 06:56
lemiman, thank you for confirming. thought I was going crazy for a second.作者: tango_gs 时间: 2013-4-22 06:56
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?作者: Analti_Calte 时间: 2013-4-22 06:56
what?
anyways, go to p.79 of schweser. don’t make it harder than it is.作者: brazilatz 时间: 2013-4-22 06:56
Wow, a lot of confusion 2 days before exam. Do we have a consensus? I cannot find a concrete example in the readings.作者: LorrinCFA 时间: 2013-4-22 06:57
Oh my gosh I’m so sorry I was thinking about the income statement. I really should’ve been more thoughtful. You subtract out minority interest earnings on the income statement but the minority interest account on the b/s is the portion of the company’s equity you do not own.作者: JonnyKay 时间: 2013-4-22 06:57
I was going to add that but did not want to complicate things. Assuming purchase includes issuing shares:
Consolidated Equity = Parent E + Minority Interest +New Shares Issued作者: AnalystForum 时间: 2013-4-22 06:57
optix: just think of it as you never adjust equity under any of the methods however for acquisition since you combined the TOTAL A + L of the target, you must add the non controlling interest to equity to make the equation balance – so it becomes higher than both equity and proportional consolidation.
this then makes things like ROE lower, etc.作者: Analti_Calte 时间: 2013-4-22 06:57
optix, I believe it is included in the consolidated BS. Thus, lowest ROE out of the 3 methods.作者: bchadwick 时间: 2013-4-22 06:58
Is the exampl 9 - Reading 22 - pg 155 relevant? According to that, shouldn’t the equity in this example be 1500?
