Group Balance sheet: non-controlling interest

The equity structure of the subsidiary are shared between the Parent company and the non-group members in the ratio of their holdings. Wherever a Parent company acquires less that 100% of the equity shares of the subsidiary, the remaining percentage goes to other non-group members. These non-group members are referred to as non – controlling interest.

Partly Owned Subsidiary

Book Plc. Acquired 75% controlling power in Biro Plc. on 1^st January, 20x5 when the retained earnings of Biro Plc. were N50million.

Their respective statements of financial position as at 31^st December, 20x5 are as follows

You are required to prepare the consolidated statement of financial statement.

Suggested solution

The step by step solution is now presented as shown below.

Step 1

The first step is to show the group structure since the subsidiary is partly owned

Step 2

The second step is to prepare the consolidation schedule wherein all the equity items of the subsidiary company will be analyzed. The essence of this being to determine

1.    if there is any accumulated (post-acquisition) reserves that the parent company can that will have to be shared between the Parent company and the non-controlling interest (NCI) in their ratio of ownership.

2.    the net assets acquired as shown below

Step 3

The third step will be to determine the amount of reserves to be reported for the Group. To get this, the Parent’s share of the post-acquisition reserves will be added to the Parent’s reserves stated in the question to get the total reserves to be consolidated. This is done as shown below.

As shown in step3 above, 75% of the post-acquisition retained earnings are added or consolidated for the parent company. The simple reason is that the Parent company owns only 75% of the voting power of the subsidiary

Step 4

The fourth step will be to compute the Non-Controlling Interest (NCI)

Step 5

Next is to determine the goodwill on acquisition. The computation of goodwill is now shown as follows

Step 6

Having computed for the goodwill, the next stage will be to prepare the consolidation whereby corresponding figures of the Parent (Book Plc.) are added to those of the Subsidiary (Biro Plc.) as shown below

Having made all these working papers (the steps above), we now draft the actual statement of financial position as required. See below