a. FRS 110 paragraph 22 requires non-controlling interest in the consolidated statement of financial position to be presented within equity, separately from the owners of the parent. The now-superseded FRS 27 (2003) required minority interest to be presented separately from liabilities and parent shareholders equity.

Discuss the implications of the change in the requirement of the accounting standard. (11 marks)

b. Assume that there are only two shareholders in a company; the controlling shareholder holds 90% of the equity shares of the company whilst the other non-controlling shareholder holds the remaining 10%. The non-controlling shareholder is reading the consolidated financial statements of the controlling shareholder but could not understand why:

• • The balance shown as non-controlling interest is different from the amount he paid to purchase the 10% equity shares of the company nor the market value of the shares of the company as at the date of the financial statements.
• • The amount of profit attributable to non-controlling interest is not equal to 10% of the net profit of the company for the financial year.

Suppose you are the Group Accountant of the company. Draft a short memorandum explaining the above to the non-controlling shareholder to help him to understand the amounts and balances related to non-controlling interest in the consolidated financial statements. (14 marks)