Lecture 10 Consolidation Indirect Ownership Interests

Lecture 10 Consolidation Indirect Ownership Interests -...

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7/11/2011 1 Chapter 26 Consolidation: indirect Consolidation: indirect ownership interests Prepared by Emma Holmes Consider the following group structure: P S 70% NCI S 30% Direct and indirect non-controlling interest T 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 T 40% 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 ST Parent Interest Direct Indirect Non-control Interest Direct Indirect Total ownership interests 70 % - - 42 % 30 % 40 % - 18% 100% 100%
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7/11/2011 2 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 Direct and indirect non-controlling interest 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 Multiple pre-acquisition elimination entries NO change to format of consolidation journals re: Impact of multiple subsidiaries (and INCI) on consolidation BCVR pre-acquisition elimination elimination of intragroup transactions HOWEVER calculation of NCI share of equity changes for the “grandchild” subsidiary The major consideration in performing a consolidation with indirect non-controlling interests is to distinguish between: Pre acquisition equity of the subsidiary
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This note was uploaded on 09/23/2011 for the course ACCT 2542 taught by Professor Knapp during the One '11 term at University of New South Wales.

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Lecture 10 Consolidation Indirect Ownership Interests -...

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