Question

How do noncontrolling interest balances affect the consolidated statement of cash flows?

A. Noncontrolling interest balances do not affect the consolidated statement of cash flows.
B. Noncontrolling interest balances are added to the consolidated statement of cash flows.
C. Noncontrolling interest balances are subtracted from the consolidated statement of cash flows.
D. Noncontrolling interest balances may increase or decrease the consolidated statement of cash flows, depending on the specific circumstances.

Answer 1

Noncontrolling interest balances do not affect the consolidated statement of cash flows because this financial statement deals only with the cash transactions of the consolidated entity.

Step-by-step explanation:

The correct answer to how noncontrolling interest balances affect the consolidated statement of cash flows is A. Noncontrolling interest balances do not affect the consolidated statement of cash flows. The consolidated statement of cash flows is concerned with cash inflows and outflows of the parent company and its subsidiaries as if they are a single economic entity. Noncontrolling interests represent the portion of equity (and net income) not owned by the parent company but by other shareholders and therefore do not impact the actual cash flows of the consolidated entity. Instead, adjustments for noncontrolling interests are generally reflected in the equity section of the consolidated balance sheet and in the consolidated income statement but not in the cash flow statement.