Noncontrolling Interest
Current reporting standards require the consolidated entity to include all the revenues, expenses, assets, and liabilities of the parent and its subsidiaries in the consolidated financial statements. When the parent does not own all of a subsidiary’s shares, various rules and procedures exist with regard to the assignment of income and net assets to noncontrolling shareholders and the way in which the noncontrolling interest is to be reported.
Required
a. How is the amount of income assigned to noncontrolling shareholders in the consolidated income statement computed if there are no unrealized intercompany profits on the subsidiary’s books?
b. How is the amount reported for the noncontrolling interest in the consolidated balance sheet computed if there are no unrealized intercompany profits on the subsidiary’s books?
c. What effect do unrealized intercompany profits have on the computation of income assigned to the noncontrolling interest if the profits arose from a transfer of (1) land or (2) equipment?
d. Are the noncontrolling shareholders of a subsidiary likely to find the amounts assigned to them in the consolidated financial statements useful? Explain.
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