1.6 Changes in a Parent’s Ownership Interest
Changes in a parent’s ownership interest in a subsidiary after the initial recognition of noncontrolling interests trigger the need to “rebalance” the equity accounts reported on the parent’s consolidated balance sheet between controlling and noncontrolling interests. Decreases in ownership of subsidiaries may arise from transactions outside the scope of ASC 810-10 whose substance is addressed by other U.S. GAAP (see Section 7.1.1). Such transactions include, but are not limited to:
- Revenue transactions (ASC 606).
- Exchanges of nonmonetary assets (ASC 845).
- Transfers of financial assets (ASC 860).
- Conveyances of mineral rights and related transactions (ASC 932).
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Gains and losses from derecognition of nonfinancial assets (ASC 610-20).
The rebalancing of equity accounts between controlling and noncontrolling
interests that results from changes in a parent’s ownership interest in a subsidiary
while the parent maintains control is generally achieved through a five-step process
(see Section 7.1.2).
However, the extent to which each step is applicable will depend on whether the
change in ownership arises as a result of (1) the parent’s purchase or sale of
subsidiary shares (see Sections
7.1.2.1 and 7.1.2.6) or (2) the direct acquisition or issuance of shares by the
subsidiary (see Sections
7.1.2.2 and 7.1.2.7).
Other changes in ownership that warrant special consideration include:
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Downstream merger transactions in which a partially owned subsidiary obtains control of its parent. See Section 7.1.2.3.
- Increases in ownership of a partially owned subsidiary that result from a business combination with a noncontrolling interest holder. See Section 7.1.2.4.
- Acquisition of additional ownership interests in a subsidiary when the parent obtained control before adopting FASB Statement 160 (codified in ASC 810). See Section 7.1.2.5.
- Changes in preferred-share ownership. See Section 7.1.2.8.
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Establishment of a noncontrolling interest in conjunction with an asset acquisition or business combination. See Section 7.1.2.10.
- Accounting for the tax effects of transactions with noncontrolling shareholders. See Section 7.1.3.
- Changes in ownership with an accompanying change in control. See Section 7.2.