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Lecture_Topic_12_Indirect_Ownership_Interests

Lecture_Topic_12_Indirect_Ownership_Interests - Chapter 26...

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Chapter 26 Consolidation: indirect ownership interests Prepared by Emma Holmes Consider the following group structure: P T S 70% 60% P controls S and S controls T S and T are both subsidiaries of P P would have to consolidate S and T into the one group NCI S 30% NCI T 40% Direct and indirect non-controlling interest
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This structure requires the recognition of: DNCI – direct non-controlling interest INCI – indirect non-controlling interest The interests of all parties in this group are summarised as follows: Direct and indirect non-controlling interest S T Parent Interest Direct Indirect Non-control Interest Direct Indirect Total ownership interests 70 % - - 42 % 30 % 40 % - 18% 100% 100% T is part of the “P Ltd Group” (and will therefore be consolidated), despite the fact that the total NCI in T is > 50% (it is 58%) This is because we use different rules to determine WHO to consolidate, as opposed to HOW to consolidate To determine WHO to consolidate, we must ask ourselves “who does P control?”. As P controls S and S controls T, then P controls both S and T. Therefore P should consolidate S AND T When it comes to HOW to consolidate, we need to recognise that P only has a 42% interest in T Direct and indirect non-controlling interest
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