What is the practical treatment of intragroup dividends in consolidation when the subsidiary has NCI? How does it affect NCI and retained earnings?
A core Group Accounting interview question — asked in analyst and associate interviews across IB, PE, and the Big 4.
THE SHORT ANSWER
Intragroup dividends are eliminated in consolidation. The parent's share of dividends from a subsidiary is eliminated against the subsidiary's retained earnings. The portion attributable to NCI is not eliminated; instead, NCI's share of the dividend is debited to NCI and credited to the dividend payable (or cash). This reflects that NCI receives their dividend directly. The elimination ensures that the consolidated retained earnings only include the parent's share of post-acquisition profits, and NCI is reduced by dividends paid to them.
WHAT INTERVIEWERS LISTEN FOR
- ✓Parent's share eliminated against retained earnings
- ✓NCI's share reduces NCI directly
- ✓Dividends payable to NCI remain
COMMON MISTAKES
- ✗Eliminating entire dividend including NCI portion
- ✗Not adjusting NCI for dividends received
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