Question

ACCOUNTING THEORY RESEARCH CASE

The FASB ASC paragraph 810-10-45-16 states: “The noncontrolling interest shall be reported in the consolidated statement of financial position within equity, separately from the parent’s equity. That amount shall be clearly identified and labeled, for example, as noncontrolling interest in subsidiaries.”

However, prior to issuing this current reporting requirement, the FASB considered several alternative display formats for the noncontrolling interest. Access the precodification standard, SFAS 160, “Noncontrolling Interest in Consolidated Financial Statements,” at www.fasb.org to answer the following:

1. What alternative financial statement display formats did the FASB consider for the noncontrolling interest?

2. What criteria did the FASB use to evaluate the desirability of each alternative?

3. In what specific ways did FASB Concept Statement 6 affect the FASB’s evaluation of these alternatives?

Answer 1

Refer below images for the above mentioned questions , in a detailed way of solution.
Answer: In deliberations prior to the 160, " Non controlling Interests in Statements" the FASB considered for displaying the non controlling consolidated balance Sheet. issuance of SFAS consolidated Financial three alternatives interest in the The FASB evaluated whether the classifications Conformed to corrent definitions of financial statement elements Cassets, Liabilities, or equity) as articulated in FASB concept Statement No.6. from SFAS 160 paragraphs 32-34 If it required that the non controlling interest be reported in the mezzanine, the Board would have had to create a new element - non controlling interest in subsidiaries - Specifically for consolidated financial statements. The Board concluded that no compelling reason exists to create a new element is Consolidated financial statements to report the interests ina subsidiary held by owners other than the parent The Board believes that using the existing sements of financal statements along with appropriate labeling and deatosure Provides financial Information in the consolidated financial Statements that is representationally faithful, understandable and relevant to the entity's owners, creditors and other resource providers.

The Board concluded that a non-controlling interest in a subsidiary does not meet the definition of a liability in the Board's conceptual frame word pargraph 35 of concepts Statement 6 defines liabitties as probable future Sacrifices of economic benefits arising from present obligations of a particolar entity to transfer assets o provide Services to other entities in the future as a result of post transactions (or) events ". The Board concluded that a non-controlling interest represents the residual interest in the net assete of a subsidiary within the consolidated group held by owners other than the parent. The non controlling interest therefore, meets the definition of equity in concepts statement 6. paragraph 49 of concepts Statement 6 defines egoity for net assets at the residual interest in the assets of an entity that remains after deducting its trabilities".