Basic question, but minority interest is always positive? And under acquisition method, total equity is always just hw addition of the two companies?
It could be 0 but you can’t have a negative amount on your balance sheet. Under Acquisition Method, assets, liabilities, revenues and expenses are combined. Equity of the sub is ignored. So if if the Parent owns 80% of a subsidiary, Parent’s balance sheet’s post-acqusition would be: Assets = Original Parent Assets + 80% x Sub Assets Liabilities = Original Parent Liability + 80% x Sub Liabilities Equity = Original Parent Equity + Minority Interest MI = 20% x Sub’s Original Equity To get a better sense, look at any of your examples of Acqusition Method. The net change in the Parents Assets - Parents Liabilities MUST equal Minority Interest (since parent’s original equity remains same)
If parent has 500 equity, then aquired 80% of a company with 400 equity, how are these reported under consolidation? Which of the following interpretation is correct? 1. Consolidation = Report 500 + 320 (your 80% share) + 80 (minority interest) 2. Consolidation = Report 500 + 400 (subsidiary’s complete equity) + 80 (minority interest) Which of these is correct, if any, and what will be the total equity? Please help, I think this is the only thing I’m not sure of under M&A reporting.
The way I understand it is like this, Parent book value of equity = 800 Purchases 80% of company b by issuing new shares equalling 300. Now, if there is no goodwill, ie fair value of company equals fair value of net assets, your minority interest is the same under both us gaap and ifrs. It’s calculation would be 20% of the company bs fair value of net assets, which is in this case going to be 375 (300/.80). You minority interest would be .2*375= 75. So you parents equity will be 800+300+75= 1175
thanks. so you are effectively reporting the total value of the subsidiary, just that it’s seperated into your proportional share and minority interest.
When using proportional consolidation if I recall correctly, there is not minority interest. You are only accounting for the portion of assets that you ‘own’, and the rest of it is off the books entirely. As for consolidation, you’d use the parent’s equity + any stock issuance to purchase + MI = S/E
Yeap, there definitely is no minority interest in proportionate consolidation
No minority interest in proportionate consolidation. SHE is the same under equity and proportionate consolidation.