FSA question on equity

dandman

between all three methods (equity, prop cons, and acq) if NI is the same and ROE is the same it would reason that SE of the parent goes unchanged, but i've seen examples where that is not the case. Could someone explain how the equity changes in each? Thanks.

xilinx_altera

SHE Acquisition Method:


SHE acquisition financed by cash .. Non controlling interest only (amount of SHE for target x non controlling interest ).


SHE acquisition financed by stock (100%) acquisition ..

NO minority interest, you just add the amount paid to the stockholders equity.

SHE acquisition financed by stock (90%) - Full goodwill

If it's full goodwill then amount of minority interest is ( amount paid / controlling % ) x (non controlling interest)

If its partial goodwill then amount of minority interest is (amount paid - (Assets - Liabilities)xnon controlling interest).

Sportsman

Bilal,

Just one minor point,

SHE in case of stock purchase of less than 100% stake will also require Capital Stock account to be increased by amount paid for the acquisition.

This is in CFA Mock, AM 46.

needhelp1700

Same for Equity and Proportional Consolidation, different fro Acquisition

tianxin

...so ROE should not be the same, yes?

jacksparrow

Minority Interest is added in Acq mathod, not in the other two

random_walker47

thats what i thought, thanks for the clarification!