Question

When identifying the NCI share of equity explain how intragroup transactions can influence the calculation.

Answer 1

The NCI does not affect the consolidation adjustments for intragroup transactions, as the full effects of the intragroup transaction are adjusted for on consolidation.In a full consolidation, the accountsare added together in full (100%) and the eliminations/adjustments are made in full (100%).

However, where a partly owned subsidiary records profit which is unrealised to the group, this af-fects the calculation of the NCI.

The NCI is entitled only to a share of the consolidated equity rather than subsidiary equity. Hence,where the subsidiary has recorded unrealised profit, the NCI share of the recorded profit of thegroup must be adjusted for any of that profit which is unrealised.

As adjustments are made for intragroup transactions, where these transactions reflect adjustments for unrealised subsidiary profit, an adjustment is also made to the NCI share of profit. The net result is then that the NCI gets a share of realised subsidiary equity.

Examples of transactions that affetcs the calculation of NCI

a) Unrealised profits in closing inventory after tax that relate to subsidiary sales.

Reduce NCI equity blance - Debit

Reduce NCI share of profit - Credit

(b) Unrealised gain after tax from subsidiary transfer of non-current asset.

Reduce NCI equity blance - Debit

Reduce NCI share of profit - Credit