Minority interest in the consolidated retained earnings statement

A consistent consolidated entity perspective for the consolidated income statement, the consolidated balance sheet, the consolidated retained earnings statement, and the consolidated cash flow statement is developed. It is demonstrated that under the entity theory, consolidated retained earnings includes the separate equities of both the parent company stockholders and the minority interest. As such, both elements of retained earnings should be reported in the consolidated retained earnings statement to make it comparable to the consolidated retained earnings statement of companies without subsidiaries or with only wholly owned subsidiaries. The effect on certain financial ratios of public companies may be substantial. It is also demonstrated that for purchased subsidiaries, minority interest in consolidate retained earnings includes unamortized write-ups of identifiable net assets and goodwill arising from purchase-type business combinations.