Examples of Non Controlling Interest

Examples of Non Controlling Interest

If a parent acquired less than 100% shares then there is no controlling interest exist. The non controlling interest is basically interest of shareholder than parent. For example ABC Company acquired 80,000 shares out of 100,000 shares of XYZ, then this is 80% acquisition and non controlling interest in this case would be 20%.

Types of Measurement of Non Controlling Interest

There are two methods available for measuring the non controlling assets.

1.      Fair Value

2.      Net asset methods

Fair value method

In fair value method NCI is measured at fair value of NCI i.e. is normally the market value of shares of subsidiary at the date of acquisition.

Net Asset method

In this method the net asset of subsidiary is calculated and non controlling interest is the proportion of net assets held by the non controlling equity holder.

Non Controlling Interest example

Parent acquired 700,000 Shares
Total Shares of Subsidiary (S & Co)	1,000,000
Net Asset of Subsidiary	$ 3,500,000
Share price at acquisition	$ 3

Calculate the non controlling interest under fair value and net asset method

Solution

1.      Fair value method

Number of Share held by Non controlling equity holder	300,000
Share price $ 4
Fair value of Non controlling interest	$1,200,000

2.      Net Asset Method

Net Assets	$ 3,500,000
Non Controlling Interest	30%
Non Controlling interest	$ 1,050,000