A transaction requiring an adjustment to the calculation of a NCI share of equity has the following characteristics:
I. The transaction must result in the subsidiary recording a profit or a loss.
II. After the transaction the other party to the transaction must have on hand an asset on which unrealised profit is accrued.
III. The initial consolidation adjustment must affect both the statement of financial position and statement of comprehensive income.
A) I and II only;
B) I, II and III;
C) II and III only;
D) None of the above.

Question

Quizplus · Accepted Answer

All three characteristics are required for a transaction to require an adjustment to the calculation of a NCI share of equity. The transaction must result in the subsidiary recording a profit or a loss (I), and after the transaction the other party to the transaction must have on hand an asset on which unrealised profit is accrued (II), which is the source of the adjustment. The initial consolidation adjustment must affect both the statement of financial position and statement of comprehensive income (III) to accurately reflect the impact of the transaction on the consolidated financial statements. Therefore, the correct answer is B) I, II and III.

A Transaction Requiring an Adjustment to the Calculation of a NCI