6.1 Overview
ASC 810-10
45-2 The retained earnings or
deficit of a subsidiary at the date of acquisition by the
parent shall not be included in consolidated retained
earnings.
45-4 When a subsidiary is initially
consolidated during the year, the consolidated financial
statements shall include the subsidiary’s revenues,
expenses, gains, and losses only from the date the
subsidiary is initially consolidated.
45-19 Revenues, expenses, gains,
losses, net income or loss, and other comprehensive income
shall be reported in the consolidated financial statements
at the consolidated amounts, which include the amounts
attributable to the owners of the parent and the
noncontrolling interest.
45-20 Net income or loss and
comprehensive income or loss, as described in Topic 220,
shall be attributed to the parent and the noncontrolling
interest.
As defined in the ASC master glossary, a noncontrolling interest
represents the “portion of equity (net assets) in a subsidiary not attributable,
directly or indirectly, to a parent.” It follows then that the measurement of
noncontrolling interests on the reporting entity’s balance sheet is affected, in
part, by the manner in which elements of a subsidiary’s income and comprehensive
income are attributed to the parent’s controlling interest and the noncontrolling
interests held by parties other than the parent.
While ASC 810-10 requires a reporting entity to allocate a
subsidiary’s income or loss and comprehensive income or loss between the controlling and noncontrolling interests, it does not prescribe a specific means for doing so. That lack of detail was acknowledged by the FASB in paragraph B38 of the Background Information and Basis for Conclusions of FASB Statement 160:
[E]ntities were making attributions before [FASB Statement
160] was issued and . . . those attributions generally were reasonable and
appropriate. Therefore, the Board decided that detailed guidance was not
needed.
Although items of income or loss and comprehensive income or loss
are commonly attributed on the basis of the relative ownership interests of the
parent and noncontrolling interests, there are many instances, as explained in
Sections 6.2.1 through
6.3, in which it would be inappropriate to attribute income or loss
solely on the basis of relative ownership percentages.