What is the recommended method for disclosing a non-controlling interest in a company on a consolidated balance sheet where significant sales have occurred between the two companies?
A)Goodwill adjustment.
B)On the balance sheet as a specially designated long-term liability.
C)In shareholder's equity.
D)None of the above.

Question

Quizplus · Accepted Answer

The non-controlling interest should be disclosed in shareholder's equity on the consolidated balance sheet because it represents the amount of ownership that the parent company does not have. This is typically shown as a separate line item on the balance sheet and can be calculated by subtracting the parent company's ownership percentage from 100%. Goodwill adjustment may be necessary if there is a difference between the amount paid for the non-controlling interest and its fair market value, but this is not the recommended method for disclosing the non-controlling interest itself. The non-controlling interest should not be shown as a liability as it represents an ownership interest, not a debt.

What Is the Recommended Method for Disclosing a Non-Controlling Interest