The case of the Majority "Minority Interest"

Most people think Cinco de Mayo and think tacos and beers 🍻🍋‍🟩 Finance nerds know it’s also a great excuse to teach equity method accounting 🤓

Before 2013, AB InBev had a more-than-50% economic stake in Grupo Modelo, the maker of Corona but here’s the accounting twist: AB InBev did not fully consolidate Grupo Modelo. Why?
Because ownership ≠ control.

AB InBev treated Modelo as an associate because even though they owned 50.2% ownership (through direct and indirect control), they only controlled 9 of 19 board members.

So no actual control meant:
– Modelo revenue did not roll into AB InBev revenue
– Modelo expenses did not roll into AB InBev expenses
– AB InBev picked up its share of Modelo earnings in one line: “share of results of associates”

Then in 2013, AB InBev acquired the rest and suddenly Modelo moved from equity method accounting to full consolidation.

Same business. Same beer. Very different financial statements.

That’s the lesson:
In M&A, the question is not just “what percentage do you own?”
It’s: Do you control it?

Because control changes everything (for the accountants):
– Revenue
– EBITDA
– Balance sheet presentation
– Purchase accounting
– NCI treatment
– Comparability over time

So this Cinco de Mayo, you’ll now have a great story to share about the origin of your beer (or not 😂). Cheers! 🍻