I’m a little bit confused. If anyone could clarify, it would be most appreciated. AM MOCK #36, asks what the total shareholder’s equity will be if consolidated financial statements are created on the day of the acquisition. The answer is 1800 which is derived from 1300 (Equity A) + 500 (minority interest). This does not make sense, because ROE should be the same under all methods (equity, prop, and consolidation). But if minority interest is included in total shareholders equity, wouldn’t it make the ROE for consolidations and equity method not equal?
ROE is not the same under all three. I’m going to assume you are using Schweser, please check the errata.
seriously… can anyone provide more information? This was one of the primary tenets in the schweser notes. Like WTF.
it’s wrong in Schweser, check out the errata on the schweser website. MI is included in SE under consolidation. It’s a major f up on Schweser’s part.
check the errata, Schweser messed it up. They assume Noncontrolling interest (MI) is not included in equity. USGAAP and IFRS now considers MI part of equity. Anddd to top it off, MI is different depending on which goodwill method you use.
Something along these lines has been posted a couple of times already. Use the search and you should find a bunch of info