2.27 Simultaneous Equations Method

The simultaneous equations method (as the term is used in this Roadmap) is relevant in the context of reciprocal interests (defined in Section 2.23) when a subsidiary owns equity of its parent. It is one of the two methods of allocating earnings of a consolidated subsidiary between third-party shareholders of the subsidiary’s parent and the subsidiary’s noncontrolling interest holders. This method is complex and is not as commonly applied as the treasury stock method (defined in Section 2.29). Refer to Example 6-10 for an illustration of this method’s application.