Calculating non-controlling interest in the presence of goodwill impairment

Abstract

Purpose – The primary aim of this paper is to illustrate how goodwill impairment loss should be accounted for when measuring non-controlling interest in subsidiaries.

Design/methodology/approach – The paper uses two scenarios to illustrate how non-controlling interest in subsidiaries should be measured in the presence of goodwill impairment loss.

Findings – The way the management of a reporting entity values the non-controlling interest in a subsidiary will result in different amounts being disclosed in financial statements for non-controlling interest in earnings, non-controlling interest, retained earnings and total equity.

Research limitations/implications – The paper uses two scenarios to illustrate a simple consolidation with a parent entity, a subsidiary and a sub-subsidiary.

Practical implications – Practical guidance on how goodwill impairment losses under International Accounting Standard 36 Impairment of Assets when measuring non-controlling interest under International Financial Reporting Standard 3 Business Combination, is provided.

Originality/value – The paper corrects any misunderstanding that may exist on the impact goodwill impairment losses have on closing equity when non-controlling interest is calculated under the different methods of valuing non-controlling interest.