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P2-D2.
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akka17bakka
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Hello Tutor,
I fail to understand why is non controlling interest shown in Parents SOFP? I mean that’s the part Parent doesn’t hold..
Thank you.
P2-D2
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Hi,
You need to recall that we have consolidated 100% of the assets and liabilities of the group, but the parent does not own all of them. The ownership of these assets and liabilities is shown in the equity section of the group SFP where we show what the parent owns and what the NCI own. If we did not show what the NCI own then the SFP would not balance as we would only have shown what the parent owns.
For example, if we had net assets of 100 and P owns 80% then P would own 80 of these and the NCI the other 20, so equity of 100 (80 + 20). If we did not show the NCI then there would be net assets of 100 and equity of 80 and an imbalance.
Hope that makes some sense.
Thanks
akka17bakka
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