Final answer:
The portion of consolidated earnings to be assigned to noncontrolling interest is computed by multiplying the subsidiary's net income by the noncontrolling interest's percentage ownership. Adjustments for intra-group transactions are made to ensure accuracy, and the resulting figure is reported on the consolidated income statement.
Step-by-step explanation:
The portion of consolidated earnings assigned to noncontrolling interest in the net income of a subsidiary is computed based on the noncontrolling interest's percentage ownership in the subsidiary. Generally, the first step is to determine the net income of the subsidiary by preparing and reviewing its income statement. Once the net income is calculated, the next step involves applying the ownership percentage that relates to the noncontrolling interest.
For instance, if a subsidiary earned $100,000 in net income and the noncontrolling interest owns 30% of the subsidiary, the portion of consolidated earnings to be assigned to noncontrolling interest would be $30,000 ($100,000 x 30%). This amount is then reported on the consolidated income statement, specifically in the equity section, reflecting the portion of net income attributable to the owners of the noncontrolling interest.
It's also important to note that any intra-group transactions that might affect net income should be adjusted, and the post-adjustment net income should be used to calculate the noncontrolling interest's share. This practice ensures that the consolidated financial statements provide a clear and accurate representation of the financial position and performance of the group as a whole, inclusive of both controlling and noncontrolling interests.