Volume 17, No. 10


Statement 160: Getting Your (Minority) Interests In Line:  Last month, the sweeping changes in acquisition accounting, Statement 141 (Revised), were reviewed. One aspect of the new acquisition accounting: firms will have to change the way they account for what’s long been called "minority interests" that result from the firm taking only a partial investment in another firm. Statement 141 (R) will make firms report existing minority interests at their current fair value when there’s a change in ownership stake, as in a step acquisition.

Changes in minority interest accounting didn’t stop there. Rather than lard up the acquisition standard with new accounting for minority interests, the FASB issued a separate standard for the second-level effects of acquisition accounting. Statement 160, "Noncontrolling Interests in Consolidated Financial Statements" changes many facets of these financial statement ghosts, resulting in a treatment more comparable to international financial reporting standards. While investors don’t often pay much attention to minority interest amounts, either on the balance sheet or the income statement, the new standard will make subtle changes affecting basic calculations in return on equity, leverage ratios, and profit margins.

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