Company consolidation question
In, http://www.ab-inbev.com/pdf/AB_InBev_AR09.pdf
Page 65 (page number as printed on the pdf), if you have a look at the "Consolidated statement of financial position", equity section:
What is the "Non-controlling interest of 2853" here?
Is it:
(a) Book Value of the equity value of the Associates of InBev (ie companies in which InBev has a stake of between 20-50%) (b) Market value of the same metric as in (a)
(c) Book Value of the Equity Value of the fully consolidated companies of InBev (ie companies in which InBev has a stake of between 50-100%) (d) Market value of the same metric as in (c)
If it is (c), then why are we adding the value here? Would the value not be fully consolidated in the accounts already? So if anything we should subtract the equity value attributable to investors who hold the remaining company? Just as we do in the Income statment (refer to line items after "Profit" in the Consolidated Income Statement)
EDIT: More questions:
If we take a look at the market capitalisation of InBev (ie share price * # of shares), would this market cap include the value of associates / subsidiaries that it holds?
Follows from above but on the B/S, while including the value of associates / subsidiaries, would you value them at (a) Market Value (b) Book value in their accounts (c) Cost ?
Friend, you're looking at liabilities - this is the part of InBevs equity (reported at book value) that does not belong to the controlling interest. It used to be called minority interest, if that rings a bell.
You're other questions:
Yes.
Hm, don't really know whats the GAAP treatment. Anybody care to comment?
Hello tandaradei, thanks for your reply. As for the very first question, so basically this is the value (market/book/whatever) of that part of the equity of subsidiaries that it actually owns. In other words, if InBev owns 80% of company X, then the number I am referring to is the value of 80% of equity of company X. Is that correct? Thank you!
subsidiary assets/liabilities are on your balance sheet at ACQUISITION DATE market value
as for your followup question, you will own 80% of the BOOK VALUE of subsidiary's equity #.
Many thanks!
You've got it backwards.
If InBev own's 80% of the equity in a subsidiary, than the minority interest will be the value of the remaining 20%.
Yes. But just to clarify further:
InBev owns, say, 80%. So it would make sense to put 80% of assets on the balance sheet, right? Well, yes, but they also have control over the remaining 20%, so it also makes sense to report the assets that you have control over, so the user of the financial statements is aware of this fact and is informed that he can deploy those assets to whatever use he sees fit. Check the definition of 'assets' - control is the key word here.
So since they report 100% of assets they must also report how this 100% is financed. 80% they financed through their equity or debt, but the remaining 20% was paid for by someone else. This someone else in essence financed the companies ability to use the assets in return for dividends - its similar to prefered shares when you think about it.
Hope it's clear now.
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