Using Technology to Teach Advanced Accounting: The Case of Minority Interest in Consolidated Financial Statements

Article excerpt


At the time we undertook the study, current accounting pronouncements in the United States that require the preparation of consolidated financial statements did not have precise guidelines on the presentation of minority interest in controlled subsidiaries. The students were exposed to a variety of reporting methods that proliferated because there are no rules that govern the accounting treatment and the presentation of the accounting information. On this topic, the students were tasked to search the Securities and Exchange Commission (SEC) database to observe such variation. They were taught how to access 10-K reports using the Internet to observe the research objective from the many consolidated financial reports that they found from SEC filings of public companies using Convenience sampling, upload their findings into a class webpage, and allow the use of Excel to summarize the findings and do the necessary statistical analysis. The study found that the reporting practices ranged from a complete disregard of such minority interest in the financial statements to presenting it only in the Income statement, and in many cases including it in the balance sheet among the liabilities or equity, or somewhere in between. The student mini survey showed that there was prevalence of presenting minority interest in the balance sheet in the hanging or mezzanine location between liabilities and equity, where the liabilities are not totaled and minority interest is listed at the end of the category before the Equity section. This variety of presentation methods is a result of the lack of guidance, hence the companies are unsure about how to present minority interest in consolidated statements. As a result of convergence between Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) and the felt need for specific rules for the accounting and presentation of minority interest, SFAS 160 entitled " Noncontrolling Interest in Consolidated Financial Statements " effective in December 2008 was issued that amended ARB No. 51 and established accounting and reporting standards for ownership interest in subsidiaries held by parties other than the parent companies, thereby requiring sufficient disclosures to identify and distinguish between interest of the parent and the interests of the non-controlling owners.


The preparation of consolidated financial statements is required for companies that own controlling interest over subsidiaries. The acquisition of other companies is seen as a means of leveraging an advantage over a company's competition through synergies achieved by two companies, increased economies of scale, vertical integration in a firm's value chain, or even diversification of risk (Hoyle, Schaefer, & Doupnik, 2009). Regardless of the reason, however, Statement of Financial Accounting Standards (SFAS) 141 revised in December 2007 (now known as SFAS 141R) requires that consolidated financial statements need be issued by the parent company if it has acquired a majority interest in its subsidiaries.

This paper summarizes the result of a class study using technology to enhance the learning of advanced accounting topics. The textbook only summarizes the state of the art on issues related with consolidations, business combinations and the preparation of consolidated financial statements. To make the class alive with real-world examples, we ventured into reading actual consolidated financial statements that we accessed from the Securities and Exchange Commission website. The students, using the Internet, read consolidated financial statements found in 1 0-K filings, worked with a class web page using PBwiki to upload their findings and used Excel to consolidate their findings. Since the 10-K reports are voluminous and each student must look at five company reports, they used "find" to limit their reading and just hone in on the presence of the specific object of search in the reports like the consolidated income statement, or consolidated balance sheet or other financial statements; notes or disclosures; or in the management discussion and analysis (MDA). …