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If P have 80% investment in A and A use100K to acquire 70% share in B.
When we caculate NCI, we need to deduct 20%*100K.
Should it be deducted from A’s NCI or B’s NCI.
I saw both version in different suggested answer…it should be deducted from A”s nci.because 20 percent nci relates to the sub not subsub.
i was thinking something else regarding this issue.. i have different approach regarding this..
Dear Mike please help me out regarding my concept over this deduction through double entry.. correct me if i’m wrong
While making the consolidation entry we:
Dr Goodwill (Residual)
Dr Assets (total of sub-subsidiary with fair value adj)
Cr Investment (of SUBSIDIARY’S books with our holding %age i.e 80%)
Cr Liablilities (total of sub-subsidiary)
Cr NCI (A’s as well as B’s)Right
Now 20% of investment is still left in A’s books..So we, instead of showing that 20% on the asset side we deduct that from the NCI (Credit Side) so as to make the balance sheet balance..!! is my logic correct??
I would need to try this with figures from a question. We used to teach consolidations using a T account approach but changed to a schedule approach about 27 years ago! and I’ve not attempted a T account consolidation since then.
Just thinking about your proposal, it seems ok – but that final line is illogical. Your balance sheet would still balance no matter whether you add it as an asset or deduct it from the liabilities.
Yes sure it wud balance both ways…. i meant to say that the allowed treatment is to deduct it from NCI instead of showing it on the asset side… any ways thanks for your feedback on that 🙂
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