Chapter 6: Partial Acquisitions, Step Acquisitions, and
Accounting for Changes in the Noncontrolling Interest
6.1 Overview and Changes in Key Provisions from Prior Standards
6.1.1 Overview
A noncontrolling interest (NCI), sometimes called minority interest, is the equity
interest in a subsidiary that is not attributable, directly or indirectly, to a parent.
This chapter discusses the accounting associated with partial acquisitions, step
acquisitions, and changes in a company’s NCI pursuant to ASC 810-10 and
IAS 27R. NCI valuation considerations are discussed in Chapter 7. Discussion of
transition issues, disclosures, and presentation of the NCI Standards is found in
Chapter 9.
Most of the differences in accounting for partial acquisitions and step acquisitions
between U.S. GAAP and IFRS have been eliminated under the Standards, although
some differences remain. The primary difference relates to the initial measurement
of the NCI. Companies that follow IFRS can choose to measure NCI at fair value
(the fair value method) or at the proportionate share of the acquiree’s identifiable
net assets (the proportionate share method) at the acquisition date. U.S. GAAP
companies are required to recognise any new NCI at fair value at the acquisition
date. Thus, the initial measurement for the noncontrolling interest will differ
between IFRS companies that choose the proportionate share method and U.S.
GAAP companies.
The examples provided in this chapter assume a simple equity structure (i.e., one
class of common shares is outstanding). Other issues may arise if a subsidiary has
a complex equity structure.