Case .14
In a classroom discussion of accounting standards for consolidated financial statements, student Tigist questioned the propriety of displaying dividends payable to minority stockholders of a partially owned subsidiary as a liability in the consolidated balance sheet.
She pointed out that, under the economic unit concept of consolidated financial statements, the minority interest in net assets of subsidiary is displayed with stockholders’ equity in the consolidated balance sheet, and that dividends payable to minority stockholders clearly area part of the interest of those stockholders in the net assets of the subsidiary. In response, student Carl contended that dividends payable to minority stockholders unquestionably meet the definition of liabilities in paragraph 35 of Statement of Financial Accounting Concepts No. 6, “Elements of Financial Statements.”
Instructions
Do you support the view of student Tigist or of student Carl? Explain.
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