When an acquirer doesn’t own all the shares in an acquiree, the equity in the subsidiary not held by the acquiree is called the non-controlling interest (‘NCI’)
NCI resulting from a business combination is measured at:
- The NCI’s proportionate share of the acquiree’s identifiable net assets (partial goodwill method), or
- Fair value (full goodwill method)
Partial Goodwill Method
| € | |
|---|---|
| Identifiable net assets (fair value) | XX |
| NCI (Identifiable net assets x %) | (XX) |
| Net assets acquired | XX |
| Purchase consideration | (XX) |
| Bargain Purchase/(Goodwill) | XX/(XX) |
NCI will not include its proportion of goodwill. Any future goodwill impairment will be deducted entirely from the group’s reserves.
Full Goodwill Method
| € | |
|---|---|
| Identifiable net assets (fair value) | XX |
| NCI (Valuation) | (XX) |
| Net assets acquired | XX |
| Purchase consideration | (XX) |
| Bargain Purchase/(Goodwill) | XX/(XX) |
NCI balance will include its proportion of goodwill. Any future goodwill impairment will be from group reserves and NCI.