US-CN Companies & Securities Law Assignment

Consolidation: Non-Controlling Interest 1. What is meant by the term ‘non-controlling interest’ (NCI)? 2. Explain whether the NCI is better classified as debt or equity. NCI is the term used for the ownership interest in a subsidiary other than the parent. It is defined in AASB 10/IFRS 10 Consolidated Financial Statements as: • The equity in a subsidiary not attributable, directly or indirectly, to a parent. The non-controlling interest is still regarded as equity of the group. Hence there are effectively two equity parties in the group: the owners of the parent and the NCI. Classification of the NCI as equity affects both the calculation of the NCI as well as how it is disclosed in the consolidated financial statements. Measurement and disclosure of the NCI are mainly determined by AASB 10/IFRS 10 and AASB 101/IAS 1 Presentation of Financial Statements. 2. Explain whether the NCI is better classified as debt or equity. The non-controlling interest is regarded as equity o...

Consolidation: Intragroup Transactions 1. Why is it necessary to make adjustments for intragroup transactions? The consolidated financial statements are the statements of the group, i.e. an economic entity consisting of a parent and its subsidiaries. These consolidated financial statements then can only contain revenues, expenses, profits, assets and liabilities that relate to parties external to the group. Adjustments must be made for intragroup transactions as these are internal to the economic entity, and do not reflect the effects of transactions with external parties. This is consistent with the entity concept of consolidation, which defines the group as the net assets of the parent, together with the net assets of the subsidiaries. Transactions between these parties internal to the group must be adjusted in full. 2. Why is it important to identify intragroup transactions as current or previous period transactions? Current period intragroup transactions affect differen...