Ideal minority interest, Financial Accounting

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IDEAL MINORITY INTEREST

The minority interest ideally is entitled to the profit after tax in minority interest. However due to consolidation, the profits of the subsidiary company should be adjusted first before getting their share. Care should also be taken especially if the subsidiary company has issued preference share capital and the minority interst owns part of this.

The computation will therefore be carried out as follows:

 

£

£

Subsidiary company’s profit after tax

 

X

Add:

 

 

Annual excess depreciation charged by subsidiary co

X

 

Unrealised profit on opening inventory if subsidiary co. had made the sale

x

X

 

 

x

Less

 

 

Annual additional depreciation on Fair value adjustment

X

 

Unrealised profit on closing inventory if subsidiary co. made the sale

X

 

Unraelsied profit on PPE if subsiadiary company made the sale

X

(x)

Adjusted profit after tax in subsidiary

 

X

Less Preference dividend

 

(x)

Profit attributable to ordinary share holders in subsidiary company

 

X

Total due to Minority interest:

 

 

   - MI’s share of preference dividend

 

X

   - MI’ s share of profit attributable to ordinary shareholders

 

X

 

 

X


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