The concept of Minority Interest arises only in case when the company prepares two sets of financial statement Viz.
Separate set of financial statement and Consolidated Financial statement.
The consolidated financial statement therefore recognizes the claim of the minority shareholders. Let’s see how minority interest, goodwill will be calculated and shown in the consolidated balance sheet of H Inc.
Let’s understand the above facts with the help of illustrations. 20% of 650,000 = $ 130,000 Amount paid for 80% equity in S Inc.
Since the balance sheet is prepared on the historical cost basis or the book value basis. Though the debate is ranging on the pros and cons of this approach.
Minority interest adjustments occurs when the parent does not own 100% of the subsidiary.
investment value in subsidiary company S was valued at $ 520,000 in year 1.
Which was subsequently increased by ,000 between year 1 and year 3 for its 80% share of Company S earnings. Similarly minority interest in company S has increased from 0,000 on January 1 2015 to $ 141,000 on January 2019.
checkout the difference between IFRS vs US GAAP The reason for separate line item with respect to minority interest is to give clear picture to the users of financial statement about the various controlling interest in the company.
It helps them in making an informed economic decisions and also helps them in making comparisons on the shareholding patterns of different companies.