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Hello,
I’m confused with the method of an answer to a P&L consolidation in my textbook. I cant understand the seemingly different treatment in adjustments which include the NCI in the subsidiary.
In this question the NCI share is calculated by taking the profit/OCI figures from the subsidiary’s individual accounts, adjusting for PUP and additional depreciation on FV adjustments, and multiplying by the NCI percentage.
However there was also (for example) a management charge from subsid to parent which had to be eliminated. This was dealt with by debiting other income and crediting admin expenses, in the group consolidated figures. What I can’t get my head round is how the NCI shareholders in the subsidiary are getting their fair share, since their starting profit figure is after deduction of management charge, and it isn’t added back to their share? Unlike the PUP, and additional depreciation, which is deducted.
If you have access to a bpp book this is question 17 from the question bank.Thank you,
Hi,
As the management charge adjustment doesn’t impact the overall group profit, as we’re removing back the income and expense, then there is no impact on what the NCI own. It is the same logic as when adjusting for intra-group sales, there is no adjustment to the NCI as it is just eliminating the income and expense on consolidation.
Thanks
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