Minority and Associate Interests in Consolidation Forecast
Definition
A minority interest is where the shareholder has no influence on the activity of the subsidiary, normally meaning the shareholder holds less than 50% of the equity;
An Associate is where the shareholder has significant influence on the activity of the subsidiary normally meaning the shareholder or parent hold more than 50% of the equity.
A minority interest is where the shareholder has no influence on the activity of the subsidiary, normally meaning the shareholder holds less than 50% of the equity;
An Associate is where the shareholder has significant influence on the activity of the subsidiary normally meaning the shareholder or parent hold more than 50% of the equity.
The key impacts are as follows
When you eliminate a minority interest the minority shareholding owned is removed from net profit and dividends to reflect the correct share of the entity to the holding company.
- The consolidation will include all revenues and expenses reduced by the Minority's share of the net profit and dividends
- When you consolidate an Associate interest the portion consolidated is the group’s net profit share and dividends of the investment only and the revenues and expenses are ignored
When you eliminate a minority interest the minority shareholding owned is removed from net profit and dividends to reflect the correct share of the entity to the holding company.
- The consolidation will include all revenues and expenses reduced by the Minority's share of the net profit and dividends
- When you consolidate an Associate interest the portion consolidated is the group’s net profit share and dividends of the investment only and the revenues and expenses are ignored
An Example of this:
| Associate Interest | Subsidiary $ | Consolidated values |
| Revenue | 1000,000 | |
| Net Profit | 100,000 | |
| Associate Share 10% | 10,000 | 10,000 |
Goodwill in a Consolidation Forecast
Goodwill arises when the investment - per the parent company books - in a subsidiary exceeds the net assets of the subsidiary. This difference is Goodwill.
If an entity decides that the goodwill is impaired, it must be written down to its recoverable amount. Once goodwill is impaired, the impairment cannot be reversed.
Forecast 5 creates an asset for Goodwill which can be reduced as appropriate where impairment is recognised.
The process is straightforward; Forecast 5 makes the preparation of group consolidated forecasts simple!
| In the meantime, if you’d like to see for yourself the power of Forecast 5, please go ahead and download a FREE 21 DAY TRIAL |  | Or, if you are anxious to get going with your own copy of Forecast 5 and simply want a demonstration to set you on your way, please CONTACT US |
