Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › NCI and debt
- This topic has 5 replies, 2 voices, and was last updated 4 years ago by Stephen Widberg.
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- December 5, 2019 at 4:00 pm #555153
Sir can you tell me When do we treat an NCI as a debt?
December 7, 2019 at 9:32 am #555398Some users do – I think most regard it as equity.
December 7, 2019 at 10:25 am #555408There was a question that one company had a shareholding of 51 percent for which he paid $10m and the other company was holding 48 percent in a firm.
However the company which was holding 48 percent was controlling the revenue and cost of the firm and the company with 51 percent shareholding was just taking profits.
So the question asked that Y would we treat the consideration of $10m for 51 percent shares as debt rather than NCI?
December 8, 2019 at 7:46 am #555463So the company owning 48% may have control and consolidate the subsidiary.
If the 51% shareholder does not have control, it may be seen as debt (like a preference share) if the company has some kind of OBLIGATION to transfer profits.
Interesting!
If I was writing about it it in the exam I would give the definitions of control and financial liability (Financial liability = obligation to deliver cash). Marks would be given for discussion as opposed to a cut and dried conclusion.
December 8, 2019 at 2:32 pm #555482Thank you sir 🙂
December 9, 2019 at 5:23 am #555510My pleasure.
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