(157)-RECOMMENDED TECHNIQUE FOR DEALING WITH MINORITY INTERESTS

Recommended Technique for Dealing with Minority Interests

In more complicated situations the following technique is recommended for dealing with minority interests.

• Cancel common items in the draft balance sheets. If there is a minority interest, the subsidiary company’s share capital will be a partly cancelled item. Ascertain the proportion of ordinary shares and the proportion (possibly different) of preference share held by the minority.
• Produce a working for the minority interest. Add in the amounts of preference and ordinary share capital calculated in step 1: this completes the cancellation of the subsidiary’s share capital.
  Add also the minority’s share of each reserve in the subsidiary company. Reserves belong to equity shareholders; the proportion attributable to minority interests therefore depends on their percentage holding of ordinary shares.
• Produce a separate working for each reserve (capital, revenue etc) found in the subsidiary company’s balance sheet. The initial balances on these accounts will be taken straight from the draft balance sheets of the parent and subsidiary company.
• The closing balances in these working can be entered directly onto the consolidated balance sheet.