Equity

CFA Level II
#1

Just wantted to confirm on the following one more time: Assume x% ownership where 20%Is this the Proportionate Consolidation method / Equity method way? or does it matter?

#2

Your question is unclear… But if you ask about the inclusion of minority interest under equity method and proportionate consolidation, I don’t think there is any. The equity on balance sheet simply doesn’t change…

#3

Basically, How do you calculate Equity for both Equity and Proportionate consolidation method?

#4

No need to add anything, it is the same with the parent’s total equity. Under consolidation method, we need to include minority interest in the total equity.

#5

“No need to add anything, it is the same with the parent’s total equity” If what you said is true, the how come on Balance sheet, Equity = Parent share + x*(Net income - dividend)

#6

That’s not the equity value you are calculating. It’s the amount in the investment account on the parent’s balance sheet in Other Assets.

#7

thanks thanks! so in summary, Equity stays the same as parents equity for both PC and Eq method… no need to do any extra work

#8

equity is lower for the consolidation because you’re subtracting the minority interest?

#9

Equity is higher for consolidation because MI is an equity line item.

#10

Chicago_Bull Wrote: ------------------------------------------------------- > thanks thanks! > > so in summary, > > Equity stays the same as parents equity for both > PC and Eq method… > no need to do any extra work you dun minus the NCI, instead you addit to your parent equity in the consolidated B/S

#11

COnsolidation: Total Equity (on parents B/s) = Parents orginal equity + Minority Int’s Equity

#12

so basically, Proportionate and Equity method - Do you report/ NOT report your portion of the ownership of the other company’s equity? take a lopok at this thread: http://www.analystforum.com/phorums/read.php?12,1266894

#13

ignore

#14

No. Under Proportionate Consolidation, the equity of the parent does not change. You only add the proportionate amount of the subs assets and liabilities. The accounts will balance because you subtract the cash paid for the sub from current assets. This is why ROE under Equity Method and PC will be the same.