Equity under Acquisition Method

I did a few problems in the CFAI texts and found that equity under the acquisition method will actually be HIGHER because of the minority interest portion. Thus the ROE under Acquisition method will be lower… Correct me if I am mistaken.

I got confused with the same matter ! Schweser’s mentions that equity is the same with the 3 methdos (equity, pror. consolidation and acquisition). However problem 3 in CFA’s Reading 21 mentions that equity is highest when one entity controls another (and acquisition method is used). The whole Reading on Intercorporate Investments is confusing :frowning:

its wrong see the errata, equity is greatest under the consolidation method and nearly equivalent with the equity and acquisition method

wrote it wrong: highest under acquistion, consolidation and equity are equall

consolidation and acquisition are the same thing

tru tru, i get confused on their references i.e. joint venture v. other

So correct me if I am wrong: You have 3 methods: Equity, Proportionate Consolidation and Consolidation Net Income, paid in capital and retained earnings is the same in all three methods.

This question has been throwing me off as well. I thought noncontrolling interest was supposed to go between liabilities and SE, CFA has it in Shareholders’ Equity so it really throws things for a loop. I figure I will stick to what the CFA says and throw it into SE unless someone here can come up with more justification. I am 95% confident you are correct CFA Blackbelt

whats the question? NI and Equity are the same under all 3 methods. Minority Interest goes into Equity under the Acquisition Method under both IFRS and GAAP (as of this year).

As someone mentioned, check the errata. Book 2 has many errors, and not just typos, rather conceptual mistakes as in saying ROE will be the same for all 3 methods. Even the EOC problems in Schwesers repeat these mistakes. Wonder who proofreads the books… Everything seems clearer after goin through the errata…

Stupid question. Where is the errata.


Equity is HIGHEST under Consolidation. ROE is LOWEST under Consolidation. Acquisition method uses Consolidation for accounting purposes.