Consolidating equity investment

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The relative size of ownership (generally, more than 50 percent of shares) is the key factor in assessing existence of control.

However, in certain circumstances, under effective control concept control may exist with less than 50 percent of ownership.

This is sometimes called a non-controlling interest.

The amount of interest held in the subsidiary is typically less than 50 percent; otherwise, the corporation would no longer be a subsidiary to the parent company.

For example, in 2013 financial statements Coca-Cola Hellenic Bottling Company S. states that it has a joint arrangement with Brewinvest S. Group in Greece with 50% share and consolidates its results.

A consolidated income statement includes both financial results of a parent company and its subsidiaries.

A detailed consolidation model of financial statements is a complex accounting topic and is out of scope in this article.

A minority interest is the proportion of a subsidiary company's stock not owned by its parent company.

Let’s be more practical today and learn some advanced accounting techniques.On the company's balance sheet, it would record million under If Saks rose to per share, the 10 million shares would be worth 0 million ( per share x 10 million shares = 0 million).Federated's balance sheet would be adjusted to reflect million in unrealized gains, less a deferred tax allowance for the taxes that would be owed if the shares were sold.Consequently, the concept of VIEs requires consolidation of entities that are financially controlled through special contractual arrangements rather than through voting stock interests.For non-VIEs, the voting interest model is used that considers the actual share of voting rights.

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