Owned entity net equity

Introduction

For all events in which the ownership percentage changes, or the carrying value of the financial investment changes, it is necessary to define the owned entity's net equity value when the financial investment is entered.

Defining the owned entity's net equity

The value to be entered as the net equity depends on the type of entry.

Variation type	Net equity value
The ownership % changes when compared with the previous event.	Enter the owned entity's net equity value prior to the event. This value is entered on the "Normal" accounts.
Only the owned entity's net equity changes (increase or decrease in the share capital subscribed by the group)	Enter the change in net equity related to the event. This value is entered on the "Variation" accounts.
Both entries are checked (purchase or sale of a share by minorities or to minorities, revaluation or write-down of the financial investment)	Enter the owned entity's net equity value before the event. This value is entered on the "Normal" accounts. Enter the change in the owned entity's net equity value after the event. This value is entered on the "Variation" account.

Example of a new acquisition

On 2 January 2022 a new acquisition is completed: company A00 buys 50% of company B00 for a value of 28,000 euros.

In this case, the ownership percentage changes from zero to 50. Therefore, in company B00's net equity valuation, it is necessary to enter the appropriate amounts on the "Normal" net equity accounts. If, for example, the owned entity's net equity accounts are "Issued capital" and "Other reserves", it is necessary to insert two rows on those accounts indicating a value equal to their value before the event.

Example of a capital increase

On 2 January 2023 company B00 increases its share capital by 7,000 euros and owner entity A00 subscribes that increase in proportion to the share that it owns.

In this case, there is a change in the owned entity's net equity value, with a consequent increase in the value of the financial investment from 28,000 to 31,500 (28,000 + 7,000*0.5). However, the ownership % does not change. Therefore, in company B00's net equity valuation, it is necessary to enter the appropriate amounts on the "Variation" net equity accounts (e.g. Capital - Variation - Variations).

Example of a share purchase

On 15 March 2023 company A00 purchases a further share in company B00, sold by minorities, thus increasing its ownership % to 65%, and the new carrying value of the financial investment is 65,000 euros.

In this case, there is a change in the owned entity's net equity value, with a consequent increase in the value of the financial investment from 31,500 to 65,000, but also an increase in the ownership %. In this case, in company B00's net equity valuation it is necessary to enter both B00's net equity value before the event (on the normal accounts) and the variation in the owned entity's net equity after the event (this value is entered on the "Variation" accounts, e.g. Capital - Variation - Variations).

The following events are obtained:

Owner entity	Owned entity	Type event	Date	% Own.	Carrying Value	Carrying Value difference
A00	B00	Initial consolidation	02/01/2022	50	28,000	28,000
A00	B00	Additional acquisition	02/01/2023	50	31,500	3,500
A00	B00	Additional acquisition	15/03/2023	65	65,000	33,500