# Calculate Shareholder Equity under Acquisition method

I’ve been a little confused with how to calculate new shareholder equity under the acquisition method. So we know with consolidation, we add the parent company’s assets and liabilities with sub’s assets and liabilities. So if we subtract the two, do we get the new equity?

The common way to calculate SE that I see is to just focus on the parent company’s equity, and then add minority interest, something that looks like this: original common stock + retained earnings + minority interest = new total SE. So in calculating equity, we will NOT be adding sub’s equity to parent’s equity and then add the minority interest??

anyone help??

Shareholder’s equity will be parent’s equity plus minority interest.

Ignore sub’s equity.

Thanks! Will that approach give me the same result if I were to subtract Total liabilities (parent + sub) from Total Assets (parent + sub)??

Yes.

The balance sheet balances.

Does it make a difference if the parent acquires it by stock rather than cash? I think I read somewhere that if stock was the case, then the SE = the parent’s original common stock + retained earnings + non-controlling minority interest + the proportion of interest of the acquired company. What does the last term mean? the actual ownership of the acquired company? So if it’s 20% minority interest, then it’s 80%?

I think the last item is parent company’s investment value, which should be equal to cash paid to buy sub.