Study Surgery

A: When you are doing a group accounts question, you must work out the group structure first. For example, if you are told that P Ltd owns 80,000 out of a total of 100,000 in S Ltd, then the ownership percentage is 80,000/100,000 x 100, so it is 80 per cent. This means that the other shareholders must own the remaining 20 per cent of the company. The other shareholders are called the ‘minority’, and their interest in S Ltd is called the ‘minority interest’. If P Ltd owned 70 per cent of the shares in S Ltd, then the minority shareholders would own 30 per cent, and so on.

Once you know the percentage of shares that the minority own, you can then calculate the value of this ownership at the date of the consolidation. For the consolidated balance sheet, you simply take the balance sheet total at the date of the consolidation and multiply it by the minority percentage shareholding, as calculated above.

So, if a balance sheet adds up to £3,454,000 and the minority shareholding is 20 per cent, then the minority interest in the balance sheet is: 20% x £3,454,000 = £690,800.

For the consolidated income statement, you take the profit after tax figure and multiply that by the minority percentage shareholding. So, if the profit after tax is £542,000, then the minority interest in the income statement is:
20% x £542,000 = £108,400.