In one of the answers to the text book question, it says that the NI is same for equity and Acquisition method. How can NI be same? NI in case of acquisition method is sum of NIs. Not able to understand that. Can someone help?
Yes add NI under acquisition but you also adjust down for Minority interest…Equity just takes its share of NI of the target firm so no adjustment is necessary there. In the end they come up to the same NI.
need to go back and read the books… not sure that under acquisition method - with full and partial goodwill methods that Equity will necessarily be the same as under equity. Under Prop. Consolidation - definitely there is the impact of Minority Interest - which equalizes the Equity section… Also - there is a negative Net Income portion due to Minority Interest here.
cpk123 Wrote: ------------------------------------------------------- > need to go back and read the books… > > not sure that under acquisition method - with full > and partial goodwill methods that Equity will > necessarily be the same as under equity. > > Under Prop. Consolidation - definitely there is > the impact of Minority Interest - which equalizes > the Equity section… Also - there is a negative > Net Income portion due to Minority Interest here. Minority interest isn’t recognized under proportionate consolidation.
Thanks Guys. Rule of thumb, NI is same whatever the method is. The minority interest adjustment brings it down in case of acquisition method. Shareholder’s equity number remains same under the equity method and proportionate consolidation. It changes in full goodwill method and partial goodwill method and is higher for the full goodwill.