Question

Assume a parent acquires 75% of the stock of a subsidiary, in an acquisition in which goodwill is reported. If goodwill is not impaired, on the consolidated income statement the noncontrolling interest in net income as measured by U.S. GAAP is_________.

Answer 1

The noncontrolling interest in net income on a consolidated income statement under U.S. GAAP is the share of a subsidiary's income attributable to the minority shareholders, which would be 25% if the parent company owns 75% and there is no goodwill impairment.

Step-by-step explanation:

When a parent company acquires 75% of the stock of a subsidiary and reports goodwill, the noncontrolling interest, or minority interest, will be recognized on the consolidated income statement. Under U.S. GAAP, the noncontrolling interest in net income is the proportion of the subsidiary's income that is not owned by the parent company. In this case, because the parent company owns 75%, the noncontrolling interest would be the remaining 25%. The consolidated income statement will show the noncontrolling interest's share of net income after any goodwill impairment has been considered. However, if there is no impairment, the recognized goodwill does not affect the noncontrolling interest in net income.