Non-Controlling Interest (NCI)

An approach to measuring goodwill in a business combination where the acquirer recognises goodwill only in proportion to its ownership interest, rather than attributing goodwill to the non-controlling interest. Under IFRS 3, acquirers have a choice on a transaction-by-transaction basis to measure non-controlling interests either at fair value (full goodwill) or at the NCI's proportionate share of identifiable net assets (partial goodwill).

A reduction applied to the pro rata value of a business to reflect the disadvantages of owning a non-controlling interest, including inability to direct business strategy, set compensation, force distributions, or compel liquidation. The minority interest discount is the mathematical complement of the control premium and is typically applied when valuing interests of less than 50% in private companies.

The ratio of earnings before interest and taxes (EBIT) to interest expense, measuring a company's ability to meet its interest obligations from operating profits. A higher ratio indicates greater financial headroom and lower default risk.

An approach to measuring goodwill in a business combination where goodwill is recognised for both the acquirer's share and the non-controlling interest's share, resulting in a higher total goodwill figure. Under ASC 805, the full goodwill method is mandatory for all business combinations.

The required accounting method for business combinations under IFRS 3 and ASC 805, which involves identifying the acquirer, determining the acquisition date, recognising and measuring the identifiable assets acquired and liabilities assumed at fair value, and recognising goodwill or a gain from a bargain purchase. The acquisition method replaced the previously permitted pooling of interests method and ensures that all identifiable intangible assets are separately recognised at fair value on the acquirer's balance sheet.

A business combination achieved in stages, where the acquirer held a previously existing equity interest in the acquiree before obtaining control. Under IFRS 3 and ASC 805, the acquirer must remeasure its previously held equity interest at fair value at the acquisition date and recognise any resulting gain or loss in profit or loss.

A business combination in which the fair value of the identifiable net assets acquired exceeds the consideration transferred, resulting in a gain rather than goodwill. Under IFRS 3 and ASC 805, the acquirer must reassess whether all assets and liabilities have been correctly identified and measured before recognising a bargain purchase gain in profit or loss.

A historical method of accounting for business combinations in which the assets and liabilities of the combining entities were carried forward at their existing book values rather than being restated to fair value. Pooling of interests was prohibited by IFRS 3 (2004) and SFAS 141 (2001, now ASC 805) in favour of the acquisition method, which requires fair value measurement of all identifiable assets and liabilities.

Why does chain of title matter for an IP loan?

Chain of title matters because a lender can only take security over IP the borrower genuinely owns. Gaps, such as unassigned contractor or employee work, can void the collateral and stop the loan.

What is Section 859A and why does it matter for IP loans?

Section 859A of the Companies Act 2006 requires most company charges to be registered at Companies House within 21 days. Miss the deadline and the security is void against a liquidator or administrator.

What are liquidation preferences and how do they affect founders?

Liquidation preferences give investors priority over common shareholders in an exit, ensuring they recover their investment first — participating preferences can significantly reduce founder payouts in moderate exit scenarios.