Recall that we have described a group structure as a
situation where a parent and a subsidiary exist under the same umbrella. We
have discussed consolidation of statements of financial position of a parent
and its subsidiary.
We now wish to present the lecture note on consolidation
of income statement.
Note that our definitions of parent, subsidiary,
control, goodwill remain the same for income statement as statement of
financial position. However, the computation of non-controlling interest (NCI)
takes a different approach under the income statement.
Computation of Non-Controlling Interest (NCI)
And Consolidation Approach
The following example illustrates the computation of the
NCI.
Assuming the following F-Acc Plc holds 68% of the
controlling power in C-Acc Ltd and that their respective statements of income
for the year end 31st December, 20x9 are as follows
The NCI is computed as follows. The percentage holding
of the NCI is applied to the profit of the subsidiary as shown below
The above approach (formula) becomes necessary after the
consolidation has been done and we wish to show the distribution of the profit.
Now, let’s consolidate the above income statement and then see how the NCI’s
figure comes in.
The above can now formally be presented as follows
Having done the consolidation, the figure for NCI is now shown below
It is usually preferable that the two figures for the
parent are added together for presentation sake and that the figure attributable
to the parent comes in first. With this, the profit elements attributable to
each category is summarized as follows
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| Summarized Profit |
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