[lelo87]

Under what heading is "Change in non-controlling interest" shown?

Thanks.

[rehmanvohra]

I am not clear about the exact meaning placed on "Change in non-controlling interest". I think the change can occur by acquisition or disposal of investment in subsidiary.

However, IAS 7 paragraph 39-42B is clear about it. I have reproduced them below:

Changes in ownership interests in subsidiaries and other businesses
39 The aggregate cash flows arising from obtaining and losing control of subsidiaries or other businesses shall be presented separately and classified as investing activities.

40 An entity shall disclose, in aggregate, in respect of both obtaining and losing
Control of subsidiaries or other businesses during the period each of the following:
(a) the total consideration paid or received;
(b) the portion of the consideration consisting of cash and cash equivalents;
(c) the amount of cash and cash equivalents in the subsidiaries or other businesses over which control is obtained or lost; and
(d) the amount of the assets and liabilities other than cash or cash equivalents in the subsidiaries or other businesses over which control is obtained or lost, summarised by each major category.

41 The separate presentation of the cash flow effects of obtaining or losing control of subsidiaries or other businesses as single line items, together with the separate disclosure of the amounts of assets and liabilities acquired or disposed of, helps
To distinguish those cash flows from the cash flows arising from the other operating, investing and financing activities. The cash flow effects of losing control are not deducted from those of obtaining control.

42 The aggregate amount of the cash paid or received as consideration for obtaining or losing control of subsidiaries or other businesses is reported in the statement of cash flows net of cash and cash equivalents acquired or disposed of as part of
Such transactions, events or changes in circumstances.

42A Cash flows arising from changes in ownership interests in a subsidiary that do not result in a loss of control shall be classified as cash flows from financing activities.

42B Changes in ownership interests in a subsidiary that do not result in a loss of control, such as the subsequent purchase or sale by a parent of a subsidiary's equity instruments, are accounted for as equity transactions (see IAS 27 Consolidated and Separate Financial Statements (as amended in 2008)). Accordingly, the resulting cash flows are classified in the same way as other transactions with owners described in paragraph 17.

[lelo87]

Thanks, but that is not what I want and I apologize for not being clear the first time.

Company B is a new company set up this year. Company A owns 80% of company B and hence consolidates 100%. For this year end, it shows the 20% of the share capital + 20% of the profits of company B as minority interest in it's consolidated Balance sheet and 20% of the profits as minority interest in the P&L.

Where exactly in the cash flow are these two components of the minority interest shown (the initial contribution and the 20% of the profits)? Under "operating" or "financing" or "Investing activities"? The 20% capital contribution occurs this year and should be an inflow.

[rehmanvohra]

Thanks, but that is not what I want and I apologize for not being clear the first time.

Company B is a new company set up this year. Company A owns 80% of company B and hence consolidates 100%. For this year end, it shows the 20% of the share capital + 20% of the profits of company B as minority interest in it's consolidated Balance sheet and 20% of the profits as minority interest in the P&L.

Where exactly in the cash flow are these two components of the minority interest shown (the initial contribution and the 20% of the profits)? Under "operating" or "financing" or "Investing activities"? The 20% capital contribution occurs this year and should be an inflow.

The situation is now more clear. As you know the cash flow statement will report only cash transactions. Let me make things a bit easy for me to understand:

1. Company A is the parent
2. It has acquired 80% interest in Company B
3. Company B started operations in the current year
4. Company A prepares consolidated statements (B/S, I/S, C/F)

Now it is necessary to learn how the acquisition was made - how much in cash and how much by issue of shares. Investing activities will show only the amount paid in cash for acquiring subsidiary.

As regards the minority interest in the profit and loss account, it is just a book entry and does not involve cash movement, hence not shown in cash flow statement

[lelo87]

Thanks for clearing my doubts on the first part.

Company B was formed by contributions of cash by Company A and also by a cash contribution of cash (20%) by the minority share holder.

I guess Company A's contribution should be shown under "Investing". Should the 20% contributed by the minority shareholder be shown under "Financing activities"? Or somewhere else?

Thanks.

[rehmanvohra]

Minority contribution is not shown in the consolidated cash flow statement. Please remember that we are preparing the statement for the parent. The minority interest appears in the balance sheet.

[lelo87]

The minority interest appears in the balance sheet and changes to that would make it to the cash flow, especially if they relate to capital contributions or distributions from/to the minority interest partner. My question is whether this is shown under Financing activity or Investing activity.

[rehmanvohra]

The minority interest appears in the balance sheet and changes to that would make it to the cash flow, especially if they relate to capital contributions or distributions from/to the minority interest partner. My question is whether this is shown under Financing activity or Investing activity.

The minority interest in the balance sheet represents the share of the minority in the equity of the subsidiary. Can you please be more specific about specific changes relating to capital contributions.


Do you by any chance mean capital contributions from minority to the equity of subsidiary? If the minority is allowed to contribute capital, it will increase their share and reduce the parent's share. This can not be done because the parent will make sure that their share is not reduced in this manner.

Distributions to minority interest will surely be in the form of dividend distributions which will be reported by the subsidiary and not the parent.

[lelo87]

I'm referring to the initial contribution, say $60M by the parent and $20M by the minority shareholder. On the consolidated cash flow, $60M will be shown as an outflow under investing activities. Since we are doing a 100% consolidation of the subsidiary (I didn't mention this earlier - my mistake) the $20M too needs to be shown as an inflow, but where?

[rehmanvohra]

I think you need to study the consolidation process once again. Please remember that we are preparing consolidated statement of the group, In the Cash Flow Statement, we will show only the amount paid by the parent - PERIOD.

Consolidated financial statements of a group are presented as those of a single entity. It is true that the subsidiary received $60m from parent and $20 m from minority. Since the group's investment is $60m/$80m in the subsidiary, the group will report only $60m in its consolidated cash flow statements which represents the amount paid by the group.

[lelo87]

Thanks,

[hamzashakaa]

The minority interest which is related to P&L should be added (if it is a share in profit) to net income before minority in the statement of cash flows as a non cash item. This is in the case when you start the cash flow with net income before minority. If you start the cash flow with net income after minority then you should not include the minority interest as a non cash item because it is already included in the net income after minority. The other change in minority interest related to capital is included as a cash inflow from financing activity.

[rehmanvohra]

The minority interest which is related to P&L should be added (if it is a share in profit) to net income before minority in the statement of cash flows as a non cash item. this is in the case when you start the cash flow with net income before minority. If you start the cash flow with net income after minority then you should not include the minority interest as a non cash item because it is allready included in the net income after minority. the other change in minority interest related to capital is included as a cash inflow from financing activity.

This is something new for me. Can you please be kind enough to give an example? This will surely add to every one's knowledge. Thanks.

[JIM.TX]

Your exchange has been helpful to me because I have the same situation. In the Balance Sheet I believe you can either eliminate the minority interest by removing the cash contributed or you can show non-controlling interest in the Balance Sheet and offset the investment amount from $80 to $60.