Calculating non‐controlling interest in the presence of goodwill impairment

Purpose

The primary aim of this paper is to illustrate how goodwill impairment loss should be accounted for when measuring non‐controlling interest in subsidiaries.

Design/methodology/approach

The paper uses two scenarios to illustrate how non‐controlling interest in subsidiaries should be measured in the presence of goodwill impairment loss.

Findings

The way the management of a reporting entity values the non‐controlling interest in a subsidiary will result in different amounts being disclosed in financial statements for non‐controlling interest in earnings, non‐controlling interest, retained earnings and total equity.

Research limitations/implications

The paper uses two scenarios to illustrate a simple consolidation with a parent entity, a subsidiary and a sub‐subsidiary.

Practical implications

Practical guidance on how goodwill impairment losses under International Accounting Standard 36 Impairment of Assets when measuring non‐controlling interest under International Financial Reporting Standard 3 Business Combination, is provided.

Originality/value

The paper corrects any misunderstanding that may exist on the impact goodwill impairment losses have on closing equity when non‐controlling interest is calculated under the different methods of valuing non‐controlling interest.