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CA Intermediate · Advanced Accounting · AS 21 Consolidated Financial Statements

Vishwa Ltd. holds 70% of the equity of Tanishq Gears Ltd., acquired when the subsidiary's equity share capital was ₹10,00,000 and its reserves were ₹2,00,000. At the consolidated balance sheet date, Tanishq Gears Ltd. has equity share capital of ₹10,00,000 and reserves of ₹5,00,000. The amount of non-controlling (minority) interest to be shown in the consolidated balance sheet is:

Non-controlling interest is ₹4,50,000. It is the outside shareholders' 30% share of the subsidiary's net worth at the balance sheet date, which is ₹15,00,000 of capital and reserves. This covers their share of the equity at acquisition and of the profits and reserves built up since then.

  1. A₹4,50,000Correct
  2. B₹3,60,000
  3. C₹3,00,000
  4. D₹10,50,000

Explanation

Minority interest includes its share of equity at the date of investment plus its share of movements in equity since then. Its share is 30% of the current net worth, 30% × (10,00,000 + 5,00,000) = 4,50,000. Equivalently, 30% × 12,00,000 = 3,60,000 at acquisition plus 30% × 3,00,000 = 90,000 of post-acquisition increase, giving 4,50,000. Option B omits the post-acquisition increase.

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