Question

Which of the following is not a correct statement about noncontrolling interest?

Answer 1

Noncontrolling interests are entitled to preference in dividends and payouts in liquidation is not a correct statement about noncontrolling interest.

Option B

Explanation:

Non-controlling interest (NCI) is the part of the equity in a corporation not directly related to a parental company that has a controlling interest (above 50% but below 100%) and strengthens the financial results of the corporation with its own.

Suppose, for example, that Alpha acquires 80 percent of Sierra's outstanding stock. As Alpha controls over 50% of the Sierra region, Alpha consolidates the financial performance of Sierra that has its own financial results.

Alpha's balance sheet reports as NCI 20 percent of the Sierra equity which Alpha does not own. In proportion to their amounts of holding, the Incorporated Net Income is assigned to parental and non-controlling interest parties (minority shareholders); 80% to Alpha and, in this situation, 20% to un-controlling interest.