How are non-controlling interests affected by intragroup transactions?

Expert Solution

Non-Controlling Interests gets affected by intragroup transaction by way of adjustments to profit/(loss) of Subsidiary company as result of various transactions between Parent & Subsidiary Company .

Example 1. If parent company has sold some inventory to subsidiary company at Cost plus margin basis and at the date of consolidation, if any inventory is unsold in the books of subsidiary then we have to eliminate the profit margin included in the inventory by crediting Inventory & Debiting cost of goods sold. Which will result in change in profit of subsidiary company & hence, Non-controlling interest share of subsidiary company will also get affected by the same.

Another Example2, If parent company has sold some fixed assets to subsidiary company at value more than the carrying amount in books of parent company. While doing the consolidation , we have to eliminate the profit margin in the books of parent company & excess depreciation charged in the books of subsidiary company at the date of consolidation. The adjustment in subsidiary company will result in change in profit of subsidiary company & hence, Non-controlling interest share of subsidiary company will also get affected by the same.

ekkarill92 answered 1 year ago

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