What is Noncontrolling interest (NCI)?
In short
A noncontrolling interest (NCI) is the equity in a subsidiary that is not owned by the parent. It is reported in consolidated equity, separately from the parent's equity.
Key takeaways
- Under the acquisition method it is initially measured at fair value, so goodwill reflects 100% of the subsidiary.
- Consolidated net income is split between the parent and the noncontrolling interest.
- Upstream intercompany profits reduce the noncontrolling interest's share of income; downstream ones don't.
Where it's tested
FAR: Business Combinations & Consolidations — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
An acquirer purchases 80% of a target for $800,000. The fair value of the noncontrolling interest is $200,000 and the fair value of identifiable net assets acquired is $850,000. What is goodwill?