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Why balance shown as non-controlling interest is different

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Reference no: EM132642672

Question 1: Assume that there are only two shareholders in a company; the controlling shareholder holds 90% of the equity shares of the company whilst the other non-controlling shareholder holds the remaining 10%. The non-controlling shareholder is reading the consolidated financial statements of the controlling shareholder but could not understand why:

  • The balance shown as non-controlling interest is different from the amount he paid to purchase the 10% equity shares of the company nor the market value of the shares of the company as at the date of the financial statements.
  • The amount of profit attributable to non-controlling interest is not equal to 10% of the net profit of the company for the financial year.

Question 2: Suppose you are the Group Accountant of the company. Draft a short memorandum explaining the above to the non-controlling shareholder to help him to understand the amounts and balances related to non-controlling interest in the consolidated financial statements.

Reference no: EM132642672

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