How do you account for non-controlling interests (NCI)?
A core Group Accounting interview question — asked in analyst and associate interviews across IB, PE, and the Big 4.
THE SHORT ANSWER
NCI is the portion of a partly-owned subsidiary's equity and results attributable to shareholders other than the parent. You still consolidate 100% of the subsidiary's assets, liabilities, income, and expenses (control, not ownership %, drives consolidation), then present NCI separately: in the balance sheet as a distinct component within equity (not a liability), and in the P&L/OCI by attributing the relevant share of profit and comprehensive income to NCI. At acquisition, IFRS 3 lets you measure NCI either at fair value (full-goodwill method — NCI then carries its share of goodwill) or at its proportionate share of the acquiree's identifiable net assets (partial-goodwill — no NCI goodwill), chosen transaction by transaction. Subsequently NCI moves for its share of profits, dividends, and OCI. Transactions with NCI that don't change control (buying/selling stakes while retaining control) are equity transactions — no gain/loss, just a reallocation between parent equity and NCI. Upstream unrealized-profit eliminations are also split with NCI.
WHAT INTERVIEWERS LISTEN FOR
- ✓Consolidate 100% (control-driven); present NCI separately in equity and P&L
- ✓At acquisition: fair value (full goodwill) or proportionate net assets (partial goodwill), per deal
- ✓NCI updated for share of profit/OCI/dividends
- ✓Stake changes without losing control = equity transactions (no P&L)
COMMON MISTAKES
- ✗Showing NCI as a liability
- ✗Consolidating only the owned %
- ✗Recognizing P&L on stake changes that keep control
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RELATED QUESTIONS
- Explain capital consolidation under IFRS 3.
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- How do you handle a mid-year change in consolidation scope (acquisition or disposal)?
- When is proportionate consolidation used?
- Walk me through the mechanics of a step acquisition, including increases after control is obtained.
- What is the difference between the full and partial goodwill methods?