Corporate: Generally Accepted Accounting Principles and General Reserve
Corporate Accounting III
Assignment 2 Question 1: What is the difference between direct and indirect NCI? Under AASB127, the group is required to prepare the consolidation statement when parent entity acquires shares in the subsidiary. There are two parties who own shares in the subsidiary if it’s not a wholly-owned subsidiary consolidation. One is the parent entity while the other is non-controlling interest. Non-controlling interest (NCI) is defined as “the portion of the profit or loss and net assets of a subsidiary attributable to equity interest that are not owned, directly or indirectly through subsidiaries, by the parent” (Leo, et, al. 2009, p. 895). The NCI can be classified as either direct (DNCI) or indirect (INCI). Differences between them arise when there are multiple subsidiaries in the group. DNCI refers to “an NCI that holds shares directly in a subsidiary” (Leo, et,al. 2009, p. 895). INCI refers to “an NCI that has an interest in a subsidiary as a result of having an interest in the parent of that subsidiary” which means the ownership in the subsidiary is indirectly via the parent of the subsidiary (Leo, et, al. 2009, p. 895). A subsidiary in which the NCI group owns direct ownership becomes the parent entity of another subsidiary; the same party will have an indirect NCI in that subsidiary. Importantly, indirect NCI exists only where, there is a DNCI in the immediate parent of that entity (Leo, et, al. 2009, p. 879). More specifically, when the subsidiary partially owned by the parent becomes parent of any other subsidiary; the non-controlling interest that is outside of the group is indirectly entitled to the proportion of shares in that subsidiary because non-controlling interest is treated as the equity participant under AASB 127. Word count: 252 Question 2: Explain the difference in the calculation of the direct and indirect NCI.
The calculation of non-controlling interest is based on the sequence of business
Assignment 2 Question 1: What is the difference between direct and indirect NCI? Under AASB127, the group is required to prepare the consolidation statement when parent entity acquires shares in the subsidiary. There are two parties who own shares in the subsidiary if it’s not a wholly-owned subsidiary consolidation. One is the parent entity while the other is non-controlling interest. Non-controlling interest (NCI) is defined as “the portion of the profit or loss and net assets of a subsidiary attributable to equity interest that are not owned, directly or indirectly through subsidiaries, by the parent” (Leo, et, al. 2009, p. 895). The NCI can be classified as either direct (DNCI) or indirect (INCI). Differences between them arise when there are multiple subsidiaries in the group. DNCI refers to “an NCI that holds shares directly in a subsidiary” (Leo, et,al. 2009, p. 895). INCI refers to “an NCI that has an interest in a subsidiary as a result of having an interest in the parent of that subsidiary” which means the ownership in the subsidiary is indirectly via the parent of the subsidiary (Leo, et, al. 2009, p. 895). A subsidiary in which the NCI group owns direct ownership becomes the parent entity of another subsidiary; the same party will have an indirect NCI in that subsidiary. Importantly, indirect NCI exists only where, there is a DNCI in the immediate parent of that entity (Leo, et, al. 2009, p. 879). More specifically, when the subsidiary partially owned by the parent becomes parent of any other subsidiary; the non-controlling interest that is outside of the group is indirectly entitled to the proportion of shares in that subsidiary because non-controlling interest is treated as the equity participant under AASB 127. Word count: 252 Question 2: Explain the difference in the calculation of the direct and indirect NCI.
The calculation of non-controlling interest is based on the sequence of business