Question

On January 1, 2017, Chamberlain Corporation pays $388,000 for a 60 percent ownership in Neville. Annual excess fair-value amortization of $15,000 results from the acquisition. On December 31, 2018, Neville reports revenues of $400,000 and expenses of $300,000 and Chamberlain reports revenues of $700,000 and expenses of $400,000. The parent figures contain no income from the subsidiary. What is the amount that should be applied to the non-controlling interest net income?

Answer 1

Non - controlling interest (NCI) is a component of shareholders equity as reported on a consolidated balance sheet which represents the ownership interest of shareholders other than the parent of the subsidiary. Non-controlling interest is also called minority interest. A non-controlling interest or minority interest generally occurs when an ownership stake is less than 50% of the outstanding shares.

As per the details provided:

Particulars	Chamberlain Corporation (in $)	Neville (in $)
Consideration paid	388,000 for 60% stake	Nil
Annual excess fair-value amortization	Nil	15,000
Revenue as at 31st December 2018	700,000	400,000
Expenses as at 31st December 2018	400,000	300,000
Inter company revenue and expense	Nil	Nil

Step I - Calculation on non-controlling net interest income for Neville

Particulars	Reference	Amount (in $)
Income	A	400,000
Expenses	B	300,000
Excess fair value amortization	C	15,000
Net Income	D = A-B-C	85,000
Ownership stake (minority)	(100-60)%	40%
Non-controlling net interest income	40% of D	34,000

Step II - Calculation of consolidated Net Income for Chamberlain Corporation:

Particulars	Reference	Amount (in $)
Consolidatd net income-
Income	A	700,000
Expenses	B	400,000
Subsidiary net income	C	85,000
Consolidated net income	D = A-B+C	385,000
Net Income to controlling interest-
Non-controlling net interest income	E	34,000
Net income to controlling interest	F = D-E	351,000

Hence, Non-controlling net interest income is $ 34,000 and Net income to controlling interest is $ 351,000.