Where the shareholder's equity of a subsidiary is negative:
A) the NCI will be included as part of the parent interests
B) the NCI will be shown as a separate amount in the consolidated accounts
C) NCI is ignored for consolidation purposes
D) none of the above

Question

Quizplus · Accepted Answer

When the shareholder's equity of a subsidiary is negative, it means the subsidiary has accumulated losses exceeding its assets. In this case, the NCI will be shown as a separate amount in the consolidated accounts, rather than being included as part of the parent interests or ignored for consolidation purposes. This is because the negative equity affects the economic value of the subsidiary, including the value of the NCI's stake in it. Showing the NCI as a separate amount allows for greater transparency and clarity in the consolidated financial statements.

Where the Shareholder's Equity of a Subsidiary Is Negative