increase in controlling interest

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November 16, 2016 at 7:20 pm #349352
sarah
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Hi,
I am confused about the adjustment to parents equity, where a company buys further shares in an existing sub. The journal is credit bank debit NCI debit parents equity with the balancing figure – while I can see why the NCI decreases I cant get my head round why the parents equity would also decrease. What is this representing?
November 16, 2016 at 10:35 pm #349408
P2-D2
Keymaster
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Hi,

If we are buying more shares and are paying more than what the NCI is worth then think of it as a loss on the transaction in the group accounts, in that the additional transfer needs to come from the group and so we use our accumulation of reserves. We couldn’t use any other balance held on the group SFP.

Thanks
November 17, 2016 at 9:50 am #349530
sarah
Member
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that makes complete sense now! thanks very much
November 18, 2016 at 11:15 pm #349891
P2-D2
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Glad it makes sense. Just keep hold of it going into the exam as it makes a regular appearance.
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