How noncontrolling interest ends up on the balance sheet

Reference no: EM131421427

If a company owns over 50 percent of another company (subsidiary), the financial statements of the two entities are consolidated into one larger entity. For example, the 2008 financial statements of Verizon Communications, Inc. include the financial statements of Verizon Wireless, the cellular phone operator, owned 55 percent by Verizon Communications and 45 percent by Vodafone. Vodafone's interest in the assets and liabilities reported on Verizon's balance sheet are represented in an account on the balance sheet called "minority interest" (noncontrolling interest) in the amount of approximately $37 billion, which is over 18 percent of Verizon's total assets.

REQUIRED:

a. Explain how noncontrolling interest ends up on the balance sheet.

b. Discuss whether it should be classified as an asset, a liability, or a shareholders' equity item.

Reference no: EM131421427

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