3.1 Introduction
For a reporting entity to determine whether it should apply the
guidance on the measurement and recognition of noncontrolling interests, the entity
must first evaluate the scope of that guidance. Aside from providing explicit scope
limitations for certain transactions that lead to decreases in ownership without an
accompanying change in control (see Section 7.1.1), ASC 810-10 does not explicitly
address the scope of its guidance on noncontrolling interests. Rather, ASC 810-10-20
defines a noncontrolling interest as the “portion of equity (net assets) in a
subsidiary not attributable, directly or indirectly, to a parent” and further states
that a “noncontrolling interest is sometimes called a minority interest.”
This definition applies to all entities that prepare consolidated
financial statements. Although the definition is brief, it contains multiple
components, analyzed below, that are imperative for assessing whether the guidance
on noncontrolling interests is applicable. The decision tree below illustrates how
to determine whether there are any noncontrolling interests.
Note that a noncontrolling interest exists only from the perspective
of the parent that prepares consolidated financial statements. Specifically, the
reporting entity’s perspective will determine what noncontrolling interests exist.
See Section 3.2.1 for
more information.