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-   -   Non controlling interest on cashflow statement (https://www.askmehelpdesk.com/showthread.php?t=417663)

  • Nov 19, 2009, 08:25 PM
    kevibee
    Non controlling interest on cashflow statement
    How do you account for non controlling interest on the cashflow statement
  • Nov 19, 2009, 10:25 PM
    rehmanvohra

    Cash flow relating to NCI is reported as Financing Activity and it consists of dividends paid to NCI
  • Nov 20, 2009, 01:22 AM
    morgaine300

    I took this to mean an investment in another company, in which case it would be an investing activity.
  • Nov 20, 2009, 06:34 AM
    rehmanvohra
    Quote:

    Originally Posted by morgaine300 View Post
    I took this to mean an investment in another company, in which case it would be an investing activity.

    Non controlling interest (NCI) was previously called "minority interest". NCI arises where a company called parent holds shares in another company called subsidiary which are more than 50% but less than 100%, simply put "a partly owned subsidiary"

    Perhaps you do know that the parent company prepares consolidated financial statements incorporating its own as well as subsidiary's net assets.

    Parents' group financial statements will include a statement of cash flows where:

    1. The amount paid in cash for the acquisition of subsidiary will be reported under investing activities
    2. The amount of dividends paid to NCI will be reported in the Financing activity
  • Nov 21, 2009, 12:34 AM
    morgaine300
    Even non-accounting people know what a subsidiary is.

    As for the accounting treatment of it, however, that is an advanced topic (advanced, not intermediate, meaning it's not even in my more current books) that I wholly hated when I learned it and haven't touched since school.

    Which is why I normally don't touch threads about this topic. And no, I wouldn't have recognized this as even being related. Even the intermediate books don't get into much of anything concerning controlling interests, so it's simply nothing I ever see.

    But even you said the investment goes under the investing section, which is all I said.
  • Nov 21, 2009, 01:36 AM
    rehmanvohra
    Quote:

    Originally Posted by morgaine300 View Post
    Even non-accounting people know what a subsidiary is.

    As for the accounting treatment of it, however, that is an advanced topic (advanced, not intermediate, meaning it's not even in my more current books) that I wholly hated when I learned it and haven't touched since school.

    Which is why I normally don't touch threads about this topic. And no, I wouldn't have recognized this as even being related. Even the intermediate books don't get into much of anything concerning controlling interests, so it's simply nothing I ever see.

    But even you said the investment goes under the investing section, which is all I said.

    I agree that the topic is covered under Advanced Accounting which no one can deny. However, the question related to reporting "non controlling interest" in the "cash flow statement".

    The cash flow statement will be prepared by the parent after acquisition of the subsidiary. As I said earlier, the cash flow statement will report under Investing activities the amount of cash paid for acquiring a subsidiary. This investment is in the net assets of a subsidiary and not just the non controlling interest. Perhaps an example may be of help.

    Assume that Company A acquires 75% equity of Company B for $100 million. The fair value of net assets acquired are

    Property, plant and equipment $200 m
    Inventories $60 m
    Receivables $40 m
    Cash $20 m
    Current liabilities $80 m
    Non current liabilities $150 m
    Net assets $90 m

    The purchase consideration was satisfied by an issue of $10 common stock of $80 m and the balance of $20 in cash.

    The consolidated balance sheet will include all the assets and liabilities of the subsidiary by adding on a line by line basis. It will also report goodwill on acquisition of $32.5 m ($100 - $90 x 75%).

    The consolidated cash flow statement will report only $20 m under investing activities representing the amount of cash actually paid for acquisition of subsidiary and supported by a separate note on acquisition.

    At the year end, a consolidated income statement will be presented to report the group income and if there is any dividend paid by the subsidiary during the year, the consolidated income statement will report only the amount of dividend attributable to non controlling interest and which will also be reported in the consolidated cash flow statement.

    Group accounts tend to get complicated and I do not blame you for hating the subject of advanced accounting.
  • Nov 22, 2009, 04:15 PM
    morgaine300

    There is still nothing in here that disagrees with what I originally said. Your original answer was from the payment of dividend point of view. I turned around and said that my interpretation of the question is that it was the investing side, which would make the investment itself an investing activity.

    You have now confirmed TWICE that the investment in the company itself is indeed an investing activity. Which does not disagree with what I said.

    So I'm still not quite sure how what I said was incorrect that you had to start explaining things to me. I get the concept behind it - I'm just not interested in figuring out all the math involved, and therefore am not interested in the details of how it works. (You can't take a hint when I say I hated the subject?)

    I am just trying to figure out what was wrong with my original answer and so far you have provided only a confirmation of it rather than anything wrong with it. Therefore, why are you trying to explain it to me?
  • Nov 22, 2009, 10:30 PM
    rehmanvohra
    Quote:

    Originally Posted by morgaine300 View Post
    There is still nothing in here that disagrees with what I originally said. Your original answer was from the payment of dividend point of view. I turned around and said that my interpretation of the question is that it was the investing side, which would make the investment itself an investing activity.

    You have now confirmed TWICE that the investment in the company itself is indeed an investing activity. Which does not disagree with what I said.

    So I'm still not quite sure how what I said was incorrect that you had to start explaining things to me. I get the concept behind it - I'm just not interested in figuring out all the math involved, and therefore am not interested in the details of how it works. (You can't take a hint when I say I hated the subject?)

    I am just trying to figure out what was wrong with my original answer and so far you have provided only a confirmation of it rather than anything wrong with it. Therefore, why are you trying to explain it to me?

    I just do not understand why you are so offended? I can understand why you hated advanced accounting, but that does not mean that every other person should be deprived of the knowledge, especially the OP.

    It should be made clear to you that no parent company makes an investment innon controlling interest. If you consider this point with a cool head the idea should register in your mind.

    This explanation in not just for you but also for others who are interested.
  • Nov 26, 2009, 10:28 PM
    morgaine300
    Quote:

    I just do not understand why you are so offended?
    Why do you interpret all disagreements as "being offended." Despite what you think, I'm actually not that easily offended. Easily annoyed, maybe, but not easily offended. (And they are two different things.)

    Quote:

    I can understand why you hated advanced accounting, but that does not mean that every other person should be deprived of the knowledge, especially the OP.
    You did quote me, which means I assume you are answering me.

    Quote:

    It should be made clear to you that no parent company makes an investment innon controlling interest. If you consider this point with a cool head the idea should register in your mind.
    I KNOW THAT!! This has nothing to do with a "cool head." I didn't suddenly forget everything about accounting just because you're getting annoying. Another party is the one with the non-controlling interest. I might hate advanced accounting, but I DO get the concept of what a parent company is, and the difference between controlling and non-controlling. Despite that I've said otherwise, you still seem to think I don't even get what a parent company is. (I can know what something is without remembering all the detailed rules about it.)

    The fact that you think you have to explain such basic stuff to me is rather offensive, yes. I wasn't offended by your first or second post (just annoyed), but yeah, now I'm starting to get offended.

    Ten years from now I hope I can have a good laugh when someone talks to you like this. (Yeah, I know you don't understand that comment, so don't bother answering it.)

    As usually, you are missing the entire point, which is that ALL I said was that it SOUNDED LIKE from the OP's post that it was referring to an investing end, and therefore sounded like an investing activity. You then posted what sounded like a disagreement to that and I'm simply trying to figure out why. Especially when you yourself have said the same thing I did. As usually, you are off on something that doesn't even answer what I actually said.

    Quote:

    This explanation in not just for you but also for others who are interested.
    I can only repeat that you quoted me and sounded like you were explaining to me how this works. If I hadn't brought it up, I doubt seriously you would have started explaining it. So I still think you were answering me, regardless of claiming the info's there for everyone's benefit.

    Why do you always have to make everything so very, very difficult all the time?

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