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Adaptive Insights LLC.

Automate Minority Interest Adjustments

Walks you through how to set up the full consolidation method that automates non-controlling interest adjustments in the net income accounts in your income statement and the equity accounts in your balance sheet.

Audience: Admins who manage models that have consolidation enabled. 

When a company owns less than 50% of another company, it has minority interest, or non-controlling interest, in that subsidiary. Generally the parent company makes an adjustment in its net income account for the minority percent that they don't own. The value in the subsidiary's net income account calculates the minority interest adjustment in the parent company. The minority interest adjustment appears on the consolidated financial statements of parent companies.

The full consolidation method automates the calculation of minority interest in parent companies. This walkthrough is a start-to-finish example of how to set up the full consolidation method. This includes setting up the levels and accounts, creating and seeding the initial balance sheets, and exploring data in the Income Statement and Balance Sheet. The example illustrates a common general ledger and calendar setup, but yours may be different. 

Before You Begin

  • Your model must have the consolidation capability. Contact us for more information. 
  • New to consolidation? See Consolidation Overview.  
  • New to minority interest? See Consolidation Ownership for overview information.
  • Required permissions: Model Management Access > Model and Model Management Access > Consolidation.

The Basic Steps

  1. Set up your level hierarchy.
  2. Set up the Net Income with two sub-accounts:
    • Net Income Pre-Adjustment
    • Minority Interest Adjustment as a system account.
  3. Set up Net Assets:
    • Net Asset Minority Interest (rolls up to Equity).
    • Net Asset Minority Interest, Beginning (rolls up to Net Asset Minority Interest).
    • YTD Minority Interest  (rolls up to Net Asset Minority Interest).
  4. Select the trigger and accounts for full consolidation.
  5. Enter the ownership percentages.
  6. Set up Net Asset Minority Interest's initial balances. 
  7. See how it works in sheets and explore the data.

Set up Your Level Hierarchy

For this walk-through, we'll create a parent company that owns a subsidiary that also owns a subsidiary.

  1. From the nav menu, click Modeling. Then click Levels from the Level and Dimension menu.
  2. Click Create New Level createNewLevel.png and name it Grandparent. Save. 
  3. Click Create New Level createNewLevel.png and name it Parent. From the Rolls up to drop-down, click Grandparent. Save. 
  4. Click Create New Level createNewLevel.png and name it Child. From the Rolls up to drop-down, click Parent. Save.
  5. Check these settings for each new level: 

    • Version and Availability: check the checkbox for your current budget. 
    • Sheets: at least check P&L and Balance Sheet

Result

When you complete this step, your level tree looks like this:

Level tree with new levels.

Set Up Net Income 

Net Income is a built-in account at Adaptive Insights. In this step, you create two sub-accounts of Net Income. 

  • The Net Income sub-account.
  • The Net Income system account. A system account is a calculated account that uses a behind the scenes formula based on how the account is used in the model. When you associate the full consolidation method with a system account and one other general ledger account, you activate the minority interest calculation.

You must create the net income sub-account before you create the system account.

Create Net Income Sub-Account

This step moves the data that is in Net Income to the new child account.

  1. From the breadcrumbs, click Modeling. Then click General Ledger Accounts from the Accounts menu. 
  2. Highlight the Net Income account in the hierarchy and click Create Account creatAccount.png from the toolbar. 
  3. Read the warning message: the data currently stored in Net Income will populate the new account. Click Yes.
  4. For the settings:
    • Code: NI_PreAdj
    • Name: Net Income (Pre-Adj).
    • Rolls up to: Net Income
    • Type: Periodic
    • Exchange Rate: Avg: Monthly Average
  5. Click Save.

Create the Minority Interest Adjustment Account

This account automatically calculates the minority interest adjustment. If the parent owns 80%, it multiplies the net income value by 20%. 

  1. From the general ledger account hierarchy, highlight Net Income. This should be the same account you highlighted in the previous step.
  2. From the toolbar, click Create New System Account createSystemAccount.png.
  3. For the settings:
    • Code: MI_Adj
    • Name: Minority Interest Adjustment
    • Rolls up to: Net Income
    • Exchange Rate: Avg: Monthly Average. This must always be the same as the net income account. 
  4. Click Save

Result

Your account hierarchy looks like this:

Net Income with two sub-accounts in the account list

Set Up Net Assets

For the data to flow appropriately to your balance sheet, add additional accounts to the general ledger under Equity. These accounts use master formulas and the weighted-average translation setting to move the data. For details, see Weighted-Average Translation Overview.

In this step, you create Net Assets Minority Interest, and you create its two child accounts, Net Assets Minority Interest, Beginning and YTD Net Assets.

Create Net Assets Minority Interest Account

  1. From the general ledger account hierarchy, expand Liabilities and Equities and highlight Equity.
  2. Click Create New Account create new account
  3. For the settings:
    • Code: NetAssets_MI
    • Name: Net Assets Minority Interest
    • Rolls up to: Equity
  4. Click Save

Create  Net Assets Minority Interest, Beginning Account

The beginning balance account receives the weighted-average translation transfer.

  1. In the account list, highlight Net Assets Minority Interest.
  2. From the toolbar, click Create New Account create new account.
  3. For the Account Details settings:
    • Code: NetAssets_MI_Beg.
    • Name: Net Assets Minority Interest, Beginning.
    • Type: Cumulative by default because it's the child of a cumulative account.
    • Planned by and Actuals by: Click Delta.
    • Master Formula: Enter the number 0 (zero).
      The zero in the formula makes this account read-only in sheets. 
    • Weighted-Average Translation: Click the checkbox.
    • Exchange Rate: Choose Avg: Monthly Average
      Match this setting to the YTD Minority Interest exchange rate type as a best practice.
  4. Click Save Save

Create a YTD Minority Interest Account

The YTD Minority Interest account pulls data from the Minority Interest Adjustment account with a formula. The weighted-average translation setting allows the account to accumulate and reset at a specified time period. 

  1. In the account list, highlight Net Assets Minority Interest.
  2. From the toolbar, click Create New Account create new account.
  3. In the Account Details:
    • Code: YTD_MI.
    • Name:  YTD Minority Interest.
    • Rolls up to: Net Assets Minority Interest
    • Type: Cumulative by default because it's the child of a cumulative account.
    • Planned by and Actuals by: Choose Delta.
    • Master formula: Enter -ACCT.MI_Adj, a minus sign and the code for the Minority Interest Adjustment account.
      The account pulls in the periodic value of the minority interest adjustment account, swaps the sign, and accumulates the values.
    • Weighted Average Translation: Click the checkbox.
    • Reset Balance: Click the checkbox and select Quarter.
      The account accumulates until the end of each quarter. Then, it resets the balance to zero and starts accumulating again. You would choose Year in most cases. But for purposes of this demo, choose Quarter. 
    • Transfer Balance on Reset: Click the checkbox and select Net Assets Minority Interest, Beginning .
      The account transfers the balance at the end of the year to the Net Assets Minority Interest, Beginning account at the start of the next year.
    • Exchange Rate: Choose Avg: Monthly Average
      Match the exchange rate used in the Minority Interest Adjustment account as a best practice.  
  1. Click Save Save

Result

Your general ledger account list looks like this:

MIWalkthru_NetAssetTree.png

Add the New Accounts to Sheets

In this step, add the net income accounts to the income statement sheet or P&L sheet. Then, add the net asset accounts to the balance sheet. To add accounts to a sheet:

  1. From the breadcrumb, click Modeling. Then from the Sheets menu, click Level Assigned Sheets
  2. Click the Edit link next to the sheet you're editing. 
  3. Click the Account Groups link.
  4. In the Select Accounts selection box, highlight the accounts to add and click Add to Group
  5. Click Done.

Select the Trigger and Accounts for Full Consolidation

In this step, define the ownership triggers for full consolidation. 

  1. From the breadcrumb, click Modeling.
  2. From the Others menu, click Consolidation Percentages
  3. Click Settings
  4. To define the triggers:
    1. Clear the Proportional checkbox if it's checked.
    2. Click No Consolidation and Full.
    3. Enter 50.000000001% in the From (%) field for Full. 

      MIWalkthru_ConsMeth.png
  5. From the System Account drop-down, choose Minority Interest Adjustment
  6. From the Net Income drop-down, choose the Net Income parent account. This must be the parent account to work properly.
  7. Click Apply.
  8. From the sheet toolbar, click Save otherwise the change to the settings will be lost.

Enter Percentages

The ownership percentages trigger the methods. Define the ownership for each level on the sheet.

  1. In the Consolidation Percentages Sheet, expand Parent company.
  2. Enter 80% in the Child company for January, February, and March 2018. This means that Parent owns 80% of Child.
  3. Enter 80% in Parent (Only) for January, February, and March 2018. This means that Grandparent owns 80% of Parent.
  4. Save the sheet.

The Grandparent level owns 80% of 80% of the Child level. In effect, Grandparent owns 64% of the Child level. 

Result

The sheet looks like this:

MIWalkthru_Ownership.png

Set Up  Net Assets Minority Interest Initial Balances

Create the Initial Balance Sheet

  1. From the breadcrumbs, click Modeling. Then from the Sheets menu click Level Assigned Sheets to create a standard sheet.
  2. Click the radio button Create new sheet and choose Standard from the drop-down. 
  3. For the name, enter Initial Balance Entry for Net Assets MI. Click Next.
  4. From the Type drop-down, click Equity and highlight Net Assets Minority Interest, Beginning account. Click the Add to Group button.
  5. Select the account from the list and confirm that the Show initial balance is checked. Click Next.
  6. (optional if you have multiple currencies) For dimensions, add Currency (system) and click Next. Currency-tagged splits requires this dimension on a sheet. See Currency Tagged Splits.
     Dimensions in Initial Balance Sheet
  7. Check the Grandparent, Parent and Child level and click Create Sheet.

Seed the Initial Balances

  1. From the nav menu, click Sheets
  2. From the level drop-down choose Grandparent.
  3. Click the Initial Balance Entry for Net Assets MI sheet.
  4. From the version drop-down, click Actuals. If you have sub-versions of actuals, click a sub-version.
  5. Right-click on the first column and select View by Level.
  6. Click Net Assets Minority Interest, Beginning from the account drop-down.
  7. Enter the initial balance for each level. For this exercise enter 0 for each and click Save.
  8. Click YTD Minority Interest from the account drop-down.
  9. Enter the initial balance for each level. For this exercise enter 0 for reach and click Save.

Result

The initial balance sheet looks like this:

MIWalkthru_InBalanceSheet.png

See How it Works in Sheets and Explore Data

In this step, you enter the net income data for each level and then explore cells to see how the data rolls up.

Enter the Net Income for Each Level

  1. From the nav menu, click Sheets > P&L or Income Statement sheet.
  2. In the first column, right-click > View by Level.
  3. Select the Net Income (Pre-Adj) account from the drop-down.
  4. Enter data into the Net Income (Pre-Adj) cells:
  • For Child, enter 100,000
  • For Parent, enter 200,000 in the Parent (Only) row. Net income you enter in the Parent (Only) level is income earned by Parent company, not the Child.
  • For Grandparent, enter 500,000 in the Grandparent (Only) row. 
  1. Save the sheet.

Result 

Your sheet looks like this:

MIWalkthru_NetIncomeSheets.png

Explore the Parent Level

  1. On the first column, right-click >View by Account.
  2.  Choose Parent from the level drop-down.
  3. Review the Net Income accounts:

MIWalkthru_MIAdj.png

  1. Net Income (Pre-Adj) is 300,000. Click in the cell and click Explore Cell. Review the contributing levels, the ownership percent, and the consolidation method. Full consolidation means that 100% of the Child Net Income (Pre-Adj) contributed to the Parent rollup.

MIWalkthru_ExploreCell.png

  1. Click the January 2018 cell for Minority Interest Adjustment and click Explore Cell. From the Contributing Levels, click Parent (Only) to see how the adjustment was calculated: 10% of 100,000.

the minority interest calculation in cell explorer

Explore the Grandparent Level

  1. Choose Grandparent from the level drop-down. 
  2. Review the net income accounts.

Explore the minority interest adjustment for the grandparent

  1. Click the Minority Adjustment cell for January 2018 and click Explore Cell. Notice 100% of Parent's -10,000 Minority Adjustment rolls up. 
  2. From the Contributing Levels, click Grandparent (Only). Notice 10% of Parent's 290,000 total Net Income rolls up. The total Minority Interest is the sum: -39,000.

MI_WalkthruGrandparentExploreCell.png 

Review the Balance Sheet

  1. From the breadcrumb, click Sheets > Balance Sheet.
  2. From the level drop-down, click Grandparent. 
    • The YTD Minority Interest accumulates through the quarter. 
    • It resets at the beginning of the next quarter. 
    • The Net Assets Minority Interest, Beginning account receives the balance from YTD Minority Interest at the beginning of the next quarter. 

Balance Sheet

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