relation between minority interest and the goodwill calculated

CFA Level II
#1

For the consolidation method,

  1. goodwill is consolidated in total assets under the balance sheet, while the minority interest is consolidated under the S/E section. is this correct?

  2. how is the minority interest calculated in relation to the method of goodwill used in consolidation?

#2

I think the technical term is now non-controlling interest.

#3

yeah but how is it calculated

#4

With full good will, you take the % that isnt owned by you, and multiple by the fair value.

WIth partial good willl, its based on identifiable net assets

#5

Full: price you paid/% you own*% of NCI

Partial: FV of net identifiable assets*% of NCI

#6

i just dont understand how minority interest could be based off the type of goodwill used

#7

how does this affect the liability and S/E balance on the investor’s B/S?

#8

What is an S/E?

#9

stockholders equity

#10

bump? how does change in goodwill method affect D/E on the balance sheet?

#11

What’s D/E?

#12

It’s easy as 1,2,3 S/E, D/E…

losing my mind! wish test was tomorrow :frowning:

#13

The countdown begins… why are the days going by so slow???

#14

debt to equity

#15

s2000?

#16

In full goodwill we’re recognizing goodwill for the entire company, but we don’t own the whole company. So the remedy is that we increase the noncontrolling interest for the extra goodwill we’re recognizing.

#17

If you include noncontrolling interest in equity, then D/E will be smaller under full goodwill than under partial goodwill.

If you don’t include noncontrolling interest in equity, then D/E is the same under both methods.

#18

ok, thanks!

#19

My pleasure.